Of course, one could take all these elements individually and deal with each issue separately. You could even say that the solutions to the economic crisis do not necessarily also respond to the environmental crisis, or that the two are mutually exclusive. But is that a reasonable answer?
Whether seen as one of the causes of this crisis or merely as a catalyst, the finance industry also represents a major part of the solution. This is particularly true for the investment industry.
Investors are taking a broader view and are more concerned about the sustainability of their investments, the part they play in financing the economy, their responsibility as shareholders, the medium-term potential of their investments, etc.
“We are convinced that we need to see finance from a new perspective in order to better understand the risks and opportunities of a changing world.”
Let’s get back to needs. Climate change, mass education, healthcare, management of natural resources, quality of life in cities (two-thirds of humanity will be living in urban surroundings in the years ahead)… faced with all these challenges, many companies are innovating, developing new approaches, coming up with new working organisations, testing new products and services, etc.
Some observers have been calling for a third industrial revolution. Be that as it may, the challenges lying ahead of us are also investment opportunities.
Companies need financing in order to research, innovate and factor in long-term solutions. The financial markets should acknowledge this fact and capitalise on it. However, all too often, they continue to focus on the short term.
“The challenges of the future are investment opportunities to be seized.”
Another necessity: to adapt the infrastructure in developed and developing countries.
The European Commission has set milestones for an energy transition by 2020 and France has created a roadmap that will involve huge investments, particularly in renewable energies. Public finances are tightly constrained, however, and European banks alone cannot meet these financing needs. Here again, investors hold a key to the solution.
Finally, some needs cannot be met by ‘conventional’ market mechanisms. These are needs requiring innovation in terms of social organisation. There are many examples: micro-finance (popularised by the Nobel prize awarded to Muhammad Yunus), equitable trade and socially-conscious economy, which provides close to 10% of jobs in Europe and has now caught the attention of the European Commission, including the financing aspect with a project to create social business funds.
In order to back companies embarking on the third industrial revolution, develop infrastructure, and finance the social economy, we need investments. We need markets capable of encouraging good practices and penalising bad practices. We need committed investors who set the trend and take steps in the right direction.
“We need markets capable of encouraging good practices and penalising bad practices. We need committed investors who set the trend and take steps in the right direction.”
Many investors have already turned to socially responsible investing. Their impact remains negligible, however. Looking beyond SRI, investors are clearly looking for meaning and are increasingly expressing concerns about asset allocation, models, risk approaches, benchmarking, etc.
Responsibility has become a pivotal concept. Most of the large investors have signed the UN’s Principles for Responsible Investment (PRI). This is a strong engagement that should not be underestimated.
In the same way, the ‘shareholder spring’ showed that investors are keen to behave as responsible shareholders, express their vote and engage in a dialogue with the companies in which they hold shares.
In the environmental field, institutional investors and pension funds have invested massively in clean tech and renewable energy.
“Institutional investors and private savers, notably in Europe, are in search of returns and meaning behind their investments.”
This is where we step in. This is our role. We see responsible investment as a set of techniques, expertise and investment products that enable investors to direct their cash and savings towards companies committed to a better future, financing the infrastructure that is essential to energy transition and supporting a social and solidarity-based economy, and companies that help investors understand what is at stake and play an active and responsible role.
This starts obviously with extra-financial research and the integration of ESG1 criteria in portfolio management. But we need to go much further than this.
“Offering investors solutions and creating value together over the long term: this is Mirova’s ambition.”
We decided to combine our different areas of expertise in a single investment division, a one-of-a-kind in Europe, and have organised our offering in 4 pillars: management of listed equities, infrastructure financing2, Impact investing3 and voting and engagement advisory services.
This requires an in-depth understanding of global changes in technology, politics, regulations, society and markets. We have therefore signed a foundational agreement with Cambridge University based on a research partnership focusing on sustainable development themes as well as the future creation of a taskforce, the Investors Leaders Group.
We firmly believe in the virtues of networking and sharing experiences.
Finally, our ambition and objectives would be nothing without our team of around forty specialists comprising experts in thematic investment management, fund managers specialising in different business sectors, engineers, financial and extra-financial analysts, experts in project financing and solidarity finance, etc.
Mirova’s creation reflects our high ambitions in terms of responsible investment: to remain at the cutting edge and strengthen our position in the French market, and to become a key player on the international scene.
By Philippe Zaouati, head of Mirova
Zaouati is head of development and member of Natixis Asset Management’s executive committee since 2007, deputy CEO since 2010. He is also head of Mirova, the responsible investment division of Natixis AM. Philippe Zaouati has also been in charge of the European Fund and Asset Managers Association’s (EFAMA) working group on responsible investment since 2011. This year, he became a member of the board the International Corporate Governance Network (ICGN). Actively invested in promoting responsible savings, Philippe Zaouati was also recently appointed President of the SRI Commission of the French Asset Managers’ Association (AFG).
Mirova is the responsible investment division of Natixis Asset Management. We offer an engaged investment approach aiming to combine value creation with sustainable development. The second-largest European manager of open-ended SRI funds and social business funds4 , we have €4bn in SRI equity, €7.7bn in advising on ESG/SRI (excluding equities) and €20.4bn in voting and engagement in assets under management (as at 30 September 2012). Our offering is distributed by Natixis Global Asset Management’s global distribution platform and is intended for all types of investors, both professional and non-professional. www.mirova.com