Transforming economies through sustainable investments

*This article is written in partnership with Mirova

Finance can transform economies to preserve and restore ecosystems and the climate while promoting self-inclusion, health and well-being.

This is the aim of French investment firm Mirova in its first published “mission report” in which it reconciles its focus on sustainability since 2014, with financial performance and other achievements during this period.

A conviction management company, Mirova obtains the best results from the internationally recognized BCorp certification, attesting to its environmental and social commitment, and is supported by the French management company Natixis Investment Managers. Its mission statement says investors don’t have to “choose between direction and performance” as the world moves towards more sustainable investment models to limit the effects of climate change.

As of June 30, 2022, Mirova manages €25.5 billion ($37.1 billion) in assets across equities, fixed income, private equity, energy transition infrastructure, impact social and natural capital and has helped accelerate the transformation of the economy since its inception shortly after the global financial crisis in 2008, says Boston-based Mirova US Managing Director Jens Peers.

“Our CEO Phillipe Zaouati wrote a book on positive finance, right after the financial crisis, because it was obvious that there was so much money in the world that people found they needed to invest in it. things like derivatives on subprime loans,” Peers said. said.

When the world entered the crisis, there was “not even potential positive value for society”, with this type of synthetic investment, he says.

“If you invest in wind farms or invest in education, and your return isn’t there, at least you get the benefits. There’s a reason you want to invest in these, but the only reason people wanted to invest in subprime loan derivatives…was to get, potentially, a faster financial return.

Now, as a broader asset manager, Mirova has direct investments in private equity tied to fighting deforestation, desertification, replanting parts of the Amazon rainforest and cleaning up the oceans, Peers says.

“Of course, our investments there have a very direct, immediate and measurable impact,” says Peers. “Those are, let’s say, the sexiest parts of what we do as a house, but they’re all smaller projects as well as at a very early stage.”

Asked what Mirova does for traditional investors with large funds to invest such as pension funds or individuals combined, Peers replies, “If you need cash, if you are a large pension fund that has about $60 billion of dollars, and you want to invest two or three percent, in a specific asset, assets are usually in the developed world.

Most of Mirova’s funds are in listed equities, geared towards developed countries, but also with exposure to opportunities, projects and emerging markets, he says.

The result of the influx of money into environment, social and governance (ESG) has been slower but has had a strong impact.

“We’re already seeing that over time it’s starting to kick in. We’ve seen fossil fuel companies complaining that they can’t get financing… there’s this supply and demand issue” Peers says, “If your funding isn’t there, you have to pay more and complain about it, it really starts to have an impact.”

Ratings provider Morningstar estimates that US$2.7 trillion ($3.98 trillion) is invested in ESG-focused funds globally, with Australasia-based ESG funds down 8 .6% of their value in the first quarter of 2022 to reach 38 billion dollars.

Managing director of ethical investing financial advisory firm Ethinvest, Fiona Thomas, said there could be short-term underperformance from ESG funds, but the long-term horizon is strong.

Fiona Thomas

“You don’t have to sacrifice performance to invest in line with your values ​​and it’s been proven,” says Thomas. “There will be periods when you might see underperformance, but if you look at the long term, it’s a myth that sustainable investing underperforms.”

She says her clients, and not just Gen Z and Millennials, are increasingly turning to ESG and responsible investing, with Ethinvest part of a 40-member cooperative that analyzes and rates super funds. and investment for their sustainability pedigrees.

Mirova and Ethinvest are also among the 500 members of the Responsible Investment Association Australasia (RIAA), which represents $29 trillion in assets under management, the largest and most active network of people and organizations committed to the responsible, ethical and impact investing in Australia and New Zealand.

Simon O’Connor

RIAA Chief Executive Simon O’Connor says tighter regulation from the US, Europe and Australia requires greater transparency for ESG-focused funds to meet their commitments – showing an articulation of best practice standards in the responsible investment industry.

“We are now just on the corner of a world where all major corporations regularly and consistently report on how they manage sustainability issues and how they approach climate change risk through which the activities of these same companies can be clearly defined – thanks to the emergence of taxonomies – as to whether they are contributing to a sustainable future or eroding it,” O’Connor says.

“Investors can then pull this data together to more simply assess risk, target investments to cleaner industries, and then clearly measure their own progress toward net zero.”

According to Peers, the positive impact of investing in the environment, the E of ESG, is easy to define as a solution to climate change, but social and governance impacts are about avoiding risks such as inequality, employing a diverse workforce, mitigating human rights violations and having transparent supply chains.

“Nor do we invest in companies that we believe have a negative impact on one or more of the (UN) Sustainable Development Goals,” Peers says.

These goals call for action by all countries, poor, rich and middle-income, to promote prosperity while protecting the planet and recognize that ending poverty must go hand in hand with strategies that enhance economic growth. and meet a range of social needs, including education, health, social protection and employment opportunities, while tackling climate change and protecting the environment.

For investors, that means sustainability should “guide every decision” while adapting to new challenges and opportunities, says Peers.

“Biodiversity is being raised now, and currently hardly anyone cares about it,” says Peers. “But it’s going to be a big theme, we believe, in a few years.

“How do you think about that in portfolio construction? It’s not something that people have been doing until very recently in general, and that’s also where I think we have a clear advantage.

Meanwhile, current economic volatility, such as the recent spike in inflation partly created by the war in Ukraine, may prompt a greater focus on sustainable investments.

“If anything, the war in Ukraine is going to accelerate this debate now, not so much for climate change reasons, but because Europe needs to be much more independent in terms of energy supplies, for example,” says Peers. “So longer term, the fundamentals are even worse for fossil fuels and much better for renewables.”

Much of the transition to sustainability will be driven by private assets, he says.

“Being active in the private space allows us to detect certain things before they happen in the public active space,” says Peers.

Mirova invests in natural capital, ocean strategies that can eliminate plastics, aluminum can manufacturing and recycling, and technology that will drive sustainability.

“I’m a skeptical optimist and I’m a big believer in technology,” says Peer. “The electrification of our economy is likely to accelerate quite significantly. The technologies are there, we just need to invest more in them.

Disclaimer:

This information is provided by Mirova US LLC. It is intended for general information only and does not take into account anyone’s investment objectives, financial situation or needs. It is not investment advice and should not be relied upon in making an investment decision. Mirova US LLC is a registered investment adviser with the United States Securities and Exchange Commission (SEC). Mirova US LLC is an authorized representative (no. 001277502) of Natixis Investment Managers Australia Pty Limited (AFSL 246830).

Past performance is not a reliable indicator of future performance.

Future results are impossible to predict. This article contains opinions, conclusions, estimates and other forward-looking statements that are, by their very nature, subject to various risks and uncertainties. Actual events or results may differ materially, positively or negatively, from those reflected or contemplated in these forward-looking statements.

Comments are closed.