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Mirova

PRI reporting framework 2020

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ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe Mirova's analysis of opportunities and risks integrates new and upcoming ESG factors in order to assess issuer's level of preparedness in our ratings and investment strategies.
Describe For all its funds, Mirova continuously monitors, analyzes, and reports on climate performance through three main indicators: induced emissions, emissions savings, and 2° scenario alignment. In line with our overall ESG philosophy, these indicators are measured on a lifecycle basis, including scopes 1, 2, and 3, both upstream and downstream.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

          Definition of all Mirova's investment strategies
        

13.3. Additional information. [OPTIONAL]

Mirova is a pure RI player, hence ESG issues are determining all these types of choices. We mainly pick stocks on the basis of a sustainability absolute assessment, which can lead to significant sectoral and / or geographical biais. For instance, we do not invest in the oil and gas sector and we tend to have a slight overrepresentation of European companies in our porfolio since they better integrate ESG issues in their day-to-day business and disclosure. 

All details on the above-mentioned aspects are available for more information in our publication Acting as a responsible investor :

https://www.mirova.com/sites/default/files/2019-07/MirovaImpactReport2018.pdf

 


SG 13 CC.

13.4 CC. Describe how your organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, its results, and any future plans.

Describe

Since Mirova is a long-term investor, mitigating climate change is essential to our mission. We therefore assess our exposure to climate risks via carbon footprinting and qualitative analyses across all the asset classes we manage. We attempt to capture opportunities related to climate change, like wind turbine manufacturers, companies that produce energy efficiency solutions, and low-carbon mobility, while mitigating our exposure to climate risks, including regulatory, transition, and physical risk.

We systematically consider climate risks and opportunities in our qualitative analyses, especially for sectors with major climate impact or risk exposure. On the quantitative side, we have partnered with Carbone4 to develop a carbon footprinting methdology that can be applied across all sectors and asset classes, allowing us to set targets related to our climate performance and mitigate transition risk. We assess our climate performance against the International Energy Agency’s energy investment projections under the Sustainable Development Scenario, and in the context of international agreements like the Paris Accord.

Describe

In the investment process, we foster solutions-providers, we have no exposure to carbon-intensive assets (coal, oil) , and limit our exposure to other fossil fuels-related assets (e.g car manufacturers, industrial equipments, etc) so as to ensure that there is a strong level of adequacy with 2°C climate scenarios produced by international institutions such as the IPCC (Intergovernmental Panel on Climate Change) or the IEA (International Energy Agency). 

Describe

IN our engagement we ask for disclosure of: 

- climate impact (scope 1, 2, 3 and avoided emissions, on the basis of a life-cycle analysis: this includes a forward-looking perspective; 

- disclosure on the green exposure and contribution of business models to the energy transition.

This enables to foresee the carbon trajectory of issuers is one of the main cross-sectors engagement issue (see LEA section for more details).

13.5 CC. Indicate who uses this analysis.

specify

          The PRI reports readers :-)
        

13.6 CC. Indicate whether your organisation has evaluated the potential impact of climate-related risks, beyond the investment time horizon, on its investment strategy.

Describe

As explained in previous questions, beyonf financial performance, Mirova's strategy is also striving to impact the transition towards a low-carbon economy. As a consequence, we always take into account climate-related risks and opportunities that go beyond the time-horizon. 

13.7 CC. Indicate whether a range of climate scenarios is used.

13.8 CC. Indicate the climate scenarios your organisation uses.

Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify:

          Shell Moutains, Oceans and Sky
        
Other

Other (2) please specify:

          Greenpeace Energy [R]evolution
        
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

other description (1)

          All long term issues taken into account by Mirova arise from Sustainable Development Goals. More and more, Mirova teams try to integrate biodiversity loss.
        

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

Specify the AUM invested in low carbon and climate resilient portfolios, funds, strategies or asset classes.

Total AUM
trillions billions millions thousands hundreds
Currency
Assets in USD
trillions billions millions thousands hundreds

Specify the framework or taxonomy used.

Mirova does not exclude any industry on principle. Within certain industries, however, case-by-case analysis may result in a “Risk” or “Negative” rating for all of the companies of that sector when practices do not provide an adequate level of assurance that the risks associated with the product are properly managed. “Risk” and “Negative” ratings mean that the issuer cannot be included in Mirova’s portfolios. Current resulting exclusions include the oil and gas sector. At the end of December 2019, Mirova equity funds are globally in line with a 2°C rise in temperatures. This climate profile is much better than the main market indices, which we estimate to be more in line with 5°C scenarios. This good performance is due both to the lack of investment in companies that emit large amounts of greenhouse gases and to large investments in companies involved in the low-carbon economy.

other description

          maximised porfolio contribution to the energy transition
        

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

other description

          carbon footprint of funds based on a life-cycle analysis (including scope 3 and avoided emissions)
        

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

Today, high expectations surround the measurement of carbon impact. Voluntary initiatives and – little by little – legislation push institutional investors to consider the impact that financial portfolios have on the climate and energy transition. However, current methods (of carbon footprint measurement) are not adequate to determine an investment portfolio’s contribution to these issues. Current approaches, which do not take a life-cycle vision of carbon footprinting, have the particular flaw of not accounting for emissions related to companies’ products and services. The impact of these products and services on the climate is, however, crucial in many sectors – whether positively in the case of renewable energy and energy efficiency solutions, or negatively in the case of fossil fuels. Following this observation, Mirova and Carbone 4 decided to create a partnership dedicated to developing a new methodology* capable of providing a carbon measurement that is aligned with the issues of energy transition: Carbon Impact Analytics (CIA).

The CIA methodology focuses primarily on three indicators:

- A measure of emissions ‘induced’ by an issuer’s activity from a life-cycle approach, taking into account direct emissions as well as emissions from product suppliers;
- A measure of the emissions which are ‘avoided’ due to efficiency efforts or deployment of ‘low-carbon’ solutions;
- An overall evaluation that takes into account, in addition to carbon measurement, further information on the issuer’s evolution and the type of capital or R&D expenditures.

For these evaluations, the methodology employs a bottom-up approach in which each issuer is examined individually according to an evaluation framework adapted to each sector.

Particular scrutiny is devoted to companies with a significant climate impact: energy producers, carbon-intensive sectors (industry, construction, transport), and providers of low carbon equipment and solutions. Evaluations are then aggregated at the portfolio level while addressing instances of double-counting.

By adopting a life-cycle vision that accounts for both induced and avoided emissions, the CIA methodology is a reliable tool for measuring the contribution of investments to the issues surrounding the energy transition. Once the diagnostics are made public, financial players will face increasing pressure to improve their carbon performance. Accordingly, in the long term this measure can influence greater action in low-carbon investment strategies. Portfolio carbon footprints are therefore a relevant tool in informing stakeholders, among which asset owners, on climate and carbon emissions risks.

In addition, Mirova is committed to actively communicating towards clients and beneficiaries to raise their awareness on the emissions risk and the need to tackle climate change issues. Its ESG specialists regularly publish research papers, gathered in a semi-annual book, “Mirova Insights”, and publicly available on Mirova’s website**. Some of these publications are related to climate issues. For instance, in 2016, Mirova’s head of RI Research Hervé Guez wrote “Divestment or reinvestment, what role for institutional investors?”, a focus-paper about the role played by investors in the transition towards a low-carbon economy.

*More detailed information is available in the methodology published by Carbone 4 and in Mirova’s research note describing the issues at stake

http://www.carbone4.com/sites/default/files/CarbonImpactAnalytics.pdf

http://www.mirova.com/Content/Documents/Mirova/publications/va/studies/MIR OVA_Study_Measure_Carbon_Impact_Methodology_EN.pdf.

** http://www.mirova.com/en-UK/p/Library/Publications

14.5. Additional information [Optional]

Climate change is one of the major sustainability issues identified by Mirova, and is therefore at the heart of its approach:

Macro-scenarios (among which climate-related ones) are qualitatively analysed and influence its investments themes. Mirova’s asset allocation is therefore impacted by climate change issues, albeit the fact that it is a result of ESG analysis (sector and geographical biases) rather than a pre-defined asset allocation strictly speaking (please refer to SG.13 for further explanations). Furthermore, Mirova has developed an original approach which consists in providing investors with a cross-asset-class offering on the energy transition theme. The purpose is to build their asset allocation around this theme by investing in several asset classes focused on it (Global Equity Transition Energy, Green Bonds and Renewable Energy Infrastructures), in line with the proportions suggested by Mirova’s RI experts.


By nature, low carbon or climate resilient investments are overrepresented in Mirova’s portfolios, whereas high-carbon ones are under-weighted or even excluded from its investment universe (e.g. oil and coal). The only exception is the case of industries that are carbon intensive in the production phase (scopes 1 and 2) but that make it possible to avoid significant emissions during the use phase (scope 3), for example some insulating construction materials. Mirova’s reasoning with regard to carbon issues applies to the whole life cycle.
Emissions data are incorporated in the issuers’ Sustainability Opinions (particularly when carbon is a sectorial key issue), which are systematically used to inform investment decision-making.


Mirova actively seeks climate change integration by companies, as well as climate-supportive policies from governments, through its individual/collaborative engagement initiatives and its public policy engagement activities (respectively described in detail in sections “Listed Equity Active Ownership”, questions LEA.01 to LEA.14, and “Strategy and Governance”, question SG.11)


Portfolio carbon footprints are measured and publicly disclosed (please refer to SG.14.5 above for a full description)


As explained in SG.13, qualitative scenario testing is undertaken to identify relevant sustainability-related investment themes. Scenarios are also used as an input while assessing issuers from a sustainability perspective. For example, the RI research takes into account to what extent business models are well positioned to comply with the 2 Degrees Celsius (2DS) climate scenario.


Mirova’s in-house investment teams are encouraged to monitor the emissions risks of their portfolios through raw data (e.g. issuers’ carbon footprint) provided in the proprietary database “OCTAVE”, in addition to the overall sustainability opinion.

Mirova has not defined quantified targets in terms of carbon reduction, but reflects on the alignment of its funds with a 2 degrees scenario, and it is to be highlighted that its portfolios present induced emissions that are far lower than their indicative benchmarks.  See for more details

https://www.mirova.com/sites/default/files/2019-07/MirovaImpactReport2018.pdf


SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Climate-related targets
          Get closer to all funds being in a 2°C scenario
        
          Climate profile / temperature scenario associated with our investment strategy
        
          At the portfolio level, the aggregate emissions induced and avoided are taken into account in order to assign a level of alignment with climate scenarios published by international organisations such as the IPCC (Intergovernmental Panel on Climate Change) or the IEA (International Energy Agency).
        
Weighted average carbon intensity
          weighted carbone intensity is taken into account in our methodology to align portfolio with a 2°C scenario
        
          we use tCO2/M€ of entreprise value
        
          Mirova developed a first physical indicator for carbon in partnership with Carbone41. This methodology evaluates all assets using a life cycle approach, taking into account the company’s direct activity as well as its suppliers and product use
        
Carbon footprint (scope 1 and 2)
          we do not use scope 1and 2 alone but evaluate all assets’ emissions using a life cycle approach
        
          Induced emissions (scope 1 and 2 but also 3) and avoided emissions in teCO2
        
          Life cycle analysis including scope 1, 2, 3 and avoided emmissions
        
Portfolio carbon footprint
          Portfolio carbon footprint is taken into account in our methodology to align portfolio with a 2°C scenario
        
          we use tCO2/M€ of entreprise value
        
          Mirova developed a first physical indicator for carbon in partnership with Carbone41. This methodology evaluates all assets using a life cycle approach, taking into account the company’s direct activity as well as its suppliers and product use
        
Total carbon emissions
          Although we are able to calculate absolute emissions, we do not believe it is a relevant metric to assess climate performance
        
          
        
          
        
Carbon intensity
          see weighted average carbon intensity
        
          
        
          
        
Exposure to carbon-related assets
          Demonstrate the quality of our funds on climate-related issues
        
          assets rated as « risk » or « negative » for climate related issues cannot be included in our funds
        
          assets rated as « risk » or « negative » may reflect a climate-related risks for scope 1, 2, 3 and avoided emissions
        
Other emissions metrics
          
        
          
        
          
        

14.7 CC. Describe in further detail the key targets.

Target type
Baseline year
Target year
Description
Attachments
          2018
        
          
        
          All funds to be aligned with a 2 degrees scenario / Paris agreement
        
          
        
          
        
          
        

          
        
          
        
          
        

          
        
          
        
          
        

          
        
          
        
          
        

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risk management processes used for identifying, assessing and managing climate-related risks.

Please describe

Beyond the identification, of climate related risks at sector level, each asset is evaluated though a bottom-up analysis, which enables to review both climate risks and opportunities.

To carry out this evaluation, Mirova relies on its Responsible Investment Research team of around ten people, in interaction with the various management teams. Evaluations are mainly based on an internal review of documents published by issuers and on direct exchanges with companies or project management. Mirova also relies on various sources of information (ESG rating agencies, proxy voting, sell-side financial analysts, news databases, etc.).

Climate-risks are integrated in the overall risk-opportunity approach: taking into account these two dimensions, which can often complement each other.

Capturing opportunities: positioning on technological and societal innovation when it becomes a structuring element of the economic project enables companies to capture opportunities related to achieving the SDGs.
Managing risks: a "re-internalisation of social and environmental externalities", often in the form of management of diffuse sustainable development issues, makes it possible to limit the risks associated with achieving the SDGs.

This analytical structure, which gives equal importance to opportunities and risks, is our first prism for reading sustainable development issues. The main result of these analyses is the production of an overall qualitative opinion in five levels to assess the level of asset adequacy with the achievement of the SDGs.

- Assets evaluated as “risk” or “negative” for climate-related issues are excluded from the Mirova investment universe.
- Assets evaluated as “neutral” or “positive” or “committed” for the sustainability opinion are integrated in the mirova investment universe. This reinforces the weight of positive assets in the Mirova funds.

14.9 CC. Indicate whether your organisation, and/or external investment manager or service providers acting on your behalf, undertake active ownership activities to encourage TCFD adoption.

Please describe

As part of its engagement activities, climate-disclosure is one of the main cross-sectoral issues on which all Mirova RI analysts engage with issuers. In their engagement, Mirova analysts encourage adoption of climate-related disclosure on the basis of the methodology developed with Carbon 4 that promotes a life-cycle analysis disclosure of emissions (induced emissions and avoided emissions) and a disclosure of the "green" or "low-carbon" share of revenue. 


SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

100 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

100 Percentage of AUM (+/-5%) per asset class invested in the area
100 Percentage of AUM (+/-5%) per asset class invested in the area
100 Percentage of AUM (+/-5%) per asset class invested in the area
100 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

All our investment strategies aim at investing in environmental and social theme. However, as these themes are often diverse and mixed and given that company disclosure remains extremely limited, we currently are not in a position to communicate on the share of investment per theme at such a level of granularity. We suggest to reframe this question. 

Asset class invested

100 Percentage of AUM (+/-5%) per asset class invested in the area
100 Percentage of AUM (+/-5%) per asset class invested in the area
100 Percentage of AUM (+/-5%) per asset class invested in the area
100 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

All our investment strategies aim at investing in environmental and social theme. However, as these themes are often diverse and mixed and given that company disclosure remains extremely limited, we currently are not in a position to communicate on the share of investment per theme at such a level of granularity. We suggest to reframe this question. 

15.4. Please attach any supporting information you wish to include. [OPTIONAL]



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