The narrative around sustainable investing is indeed shifting, marking the beginning of a new chapter. This evolution is driven by intensifying geopolitical tensions, rapid technological advances, and mounting ecological and social strains, all of which are causing economic instability and influencing how and where economic value is created.
As the world is changing rapidly, the definition of sustainable investing must remain pragmatic to adapt to and address today’s market challenges while upholding the integrity of the market and avoiding greenwashing. Investing in a more sustainable economy has been and remains foundational to our investment philosophy and a cornerstone of our process.
Investing in companies that support this transition can yield both positive impact and strong financial results.
For this reason, it’s important to identify opportunities across various sectors, including sectors such as metals and mining, and prioritising engagement with these companies to support their sustainability journeys and manage risks.
Has the increased criticism and politicization of ESG affected your investment thesis and portfolio convictions?
By integrating thematic thinking, rigorous ESG analysis, and skilled stock selection, we aim to generate strong long-term financial returns and sustainable growth. This approach is neither ideological nor political; it objectively pursues shared, long-term value creation. Regardless of current public opinion polarization on such topics, climate change will continue to represent a significant long-term risk for our invested companies, and widening inequalities will persist as a source of instability and disruption.
Ultimately, our goal will always be to offer a portfolio with limited exposure to sustainability-related risks that is also sufficiently diversified to capitalize on the megatrends shaping the global economy and resilient against other potential economic shocks. While our convictions in sustainable investing remain core to how we manage portfolios, the current evolution might lead to looking at additional industries and valuing companies for their role in the supply chain and their potential impact rather than only focusing on industries and companies that are already demonstrating positive impact.
How has AI influenced your research process?
We are always looking for ways to improve our processes through AI. While we are still in the early stages of AI integration, enhanced data-driven algorithms have enabled us to process larger datasets, cover a wider investment universe, and more effectively implement of our minimum standards with greater granularity, reflecting geographies and sectorial specificities. All of this is achieved while upholding our strong sustainability standards. These improvements have allowed the team to spend more time engaging directly with companies and focus on more qualitative work, leading to greater impact.
For future developments, we are mindful that the effectiveness of AI depends on the quality of information provided by companies. AI models can only analyse what is available, and the output is only as strong as the inputs. For this reason, the quality of company data is increasingly important. We continue to advocate for stronger regulations and reporting frameworks that are reasonable, pragmatic, and linked to real-world impacts. The current trends are promising, and we look forward to continued progress.
Why is engagement an important part of your investment strategy?
We view engagement as an essential part of our investment process, informing investment analysis and decisions through a strategy that prioritises themes based on their materiality for each company. By engaging with companies, we aim to influence their decision-making in terms of sustainability, share industry best practices, and foster progress on environmental or social initiatives. Successful engagements can confirm that a company is effectively transitioning towards a more sustainable strategy and serves as a positive indicator that the company is proactively addressing material issues and enhancing its long-term value potential. Engagement can also help to identify signals of potential risks.
By implementing clear plans with timelines, targets, and escalation procedures, we can demonstrate when our invested companies are making real progress in alignment and transition. Additionally, we believe active ownership increases our influence, supporting both sustainability objectives and long-term financial value.
As environmental pressures accelerate and economic challenges persist, how can investors have a meaningful impact?
The relationship between public equity investments and real-world impact is complex. To better understand this dynamic, we initiated a dedicated research project with our Mirova Research Center. While it is possible to identify positive developments at the company level, assessing “additionality” or whether such impacts would have occurred without our investment, adds another layer of complexity. Therefore, it is important to understand the scope and limitations of our impact.
Although Mirova may not be able to directly mandate emissions reductions at specific manufacturing sites, as stakeholders we can leverage various tools, including dialogue with management and exercising voting rights, to encourage companies to adopt best practices.
It is precisely these principles that inform the frameworks employed within our investment portfolios. For example, we believe that adopting a framework such as the Net Zero Investment Framework (NZIF) is more effective for investors committed to contributing to carbon neutrality than a divestment strategy. The NZIF framework enables portfolio management that is aligned with, and supports, real-world decarbonization goals while remaining consistent with our investment processes designed to capture opportunities in a transitioning global landscape.
