Mirova's Europe Environmental Equity Fund

overall rating:

2.25

planets

Ella Tescari
8/13/2021
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Mirova is a “mission-led" asset management company, as it seeks to strive for making positive change through shifting investment’s culture. The Europe Environmental Equity fund is one of Mirova’s 9 Equity funds along with other environmentally related funds such as Climate Ambition Equity Fund or Mirova’s Europe Sustainable Equity Fund. It aligns significant profitability with social and environmental standards. Mirova has the B-Corp certification, which stands for “Benefit Corporation”, a label given to companies with have a good balance between profit and purpose. This qualification sets the stage for the positive review of Mirova’s equity fund. 

What it's made of:

2.25

As for the 8th of April 2021, Mirova’s Environmental Equity Fund Net Asset Value was 161.28 MEUR. As for its YTD return - the amount of profit realized since the first trading day of the calendar year - it was 11.48% on the 8th of July of the same year. This high yield can be explained by its high-risk factor, with a rate of 6 out of 7 on a risks and rewards scale and a good overall equity market performance. In terms of sector breakdown, the fund’s portfolio is based around Industrials and Materials, which together make up for about 50% of the shares. Looking at the fund’s main holdings allows unravelling its characteristics and understanding how it fits in with ethical finance. Mirova’s Europe Environmental Equity Fund notably invests in renewable energies, with Vestas Wind Systems’ shares but also other companies whose activities are sometimes inherently polluting but have shown significant commitment to sustainability. This characteristic resonates with the fact that sustainability is an evolving concept that increasingly interacts with all spheres and industries towards a common goal. For example, Air Liquide uses its expertise to work closely with the steel industry to reduce CO2 emissions by using hydrogen on a large scale, while ASML - one of the world’s biggest suppliers to the semiconductor industry - is working at the core of the circular economy with an 85% material recycling rate in 2020. According to its report, Minerva’s Europe Environmental Equity Fund is aligned with a +1.5° global warming scenario compared to pre-industrial levels, which is the most optimistic and preferable climate change hypothesis envisioned by climate scientists. However, this is not the case for all of Mirova’s funds, which are guaranteed to be aligned with a +2° scenario.

How it's made:

2.25

100% of Minerva’s funds are labelled, or in the process of being labelled, SRI - Socially Responsible Investment. SRI investments are based on 4 criteria – environmental, social, human rights and governance. However, this does not mean that the 4 are raised to high standards for funds to get an SRI label. Any fund can choose 2 criteria and prove that its companies perform well compared to the others in the selected field. As it seems, Mirova focuses on social and environmental standards. In addition to this label, Mirova’s Europe Environmental Equity fund has the Febelfin’s label, called “Towards Sustainability”. It provides a principles-based Quality Standard, a mix of exclusion, transparency, impact, engagement, and accountability. Finally, Mirova’s Europe Environmental Fund obtained the greenfin label, created by the French Ministry of the Ecological Transition for green funds, which excludes those that invest in the nuclear sector and fossil energies. While these are good steps, nuclear and fossil energies are not the only environmentally harmful sectors. In my opinion, other social minimum standards are equally important. Nonetheless, these numerous labels give the fund legitimacy. 

Mirova’s general engagement strategy is directly aligned with the United Nations’ Sustainable Development Goals. The asset management company developed a two-pronged approach to responsible investing. Firstly, it supports companies in improving their environmental and social profile. Secondly, it shapes regulations to promote sustainable finance. Since 2015, Mirova’s has engaged in a reflection around governance issues to find a governance model “more reflective of companies with a sustainable vision”. For example, the implementation of an audited reporting system that considers sustainable development issues is one of the four pillars born out of the reform. In a favourable context to responsible investment, Mirova does not seem to be suffering from the crisis and is more than ever looking for making an impact. In 2021, it has set biodiversity and inequality as its “mission”. In terms of biodiversity, it plans on developing a specific indicator enabling the implementation of dedicated reporting in 2022. Ultimately, this dynamism shows a strong and growing interest in more responsible finance in the financial sector which is encouraging.

Who makes it:

2.5

Philipe Zaouati created Mirova in 2014 within Naxitis, a French Corporate and Investment Bank. After a career in various financial institutions, he turned to sustainable finance in the last ten years. This interest has given rise to numerous initiatives and publications such as “Green finance begins in Paris”, a book issued in 2018, and co-founding the Finance for Tomorrow initiative, showing a genuine commitment to sustainability. As for Mirova’s mission committee, it is chaired by Alexis Masse, Responsible Investment Forum’s president, who offers good experience in the field and legitimacy to the asset management company. In its impact report, Mirova highlights its attachment to transparency and quality of information. During the last critical years, Mirova has launched a call to the companies in its portfolios to review their distribution policy to preserve their key stakeholders’ sustainability as well as its own. As a result, vote against value distribution was on the increase in 2020 compared to 2019. It is worth mentioning that if Mirova benefits from a strong lead and a good reputation, Naxitis its managing company, was recently involved in the H20 scandal for holding a 50% stake, backed for a decade, in H20. H20 Asset Management had put over 1 billion euros of investors’ money into illiquid bonds, an amount over three times the limit. Naxitis ultimately informed its clients of plans to cease its partnership with H20 and named a new CEO, Nicolas Namias, after reporting a second-quarter loss of 57 MEUR. The newly appointed CEO announced the reshaping of Naxitis’ focus, allowing for results to become steadier notably through the reduction of its exposure to the oil and gas sector.