Mirova Global Green Bond Fund: Impact Report 2023

Engaging today to build our future

The financial world plays a fundamental role in enabling companies to achieve virtuous business models. However, in recent months, doubts seemed to be mounting over the urgency of the transformation of our economy into a fairer and more sustainable system. Why is this?

First, because organisations, in the broadest sense, have seen their priorities disrupted by the emergence of sharp geopolitical tensions, the war in Ukraine, rising commodity prices, and of course higher interest rates.

Second, because the rather sluggish performances sometimes posted by these funds have sparked a degree of scepticism. Mirova considers these complex crises with lucidity and resilience, preferring to steer clear of short-term or partial reasoning. Sustainability is about long-term thinking. The transformation of our economy into a sustainable model has always been - and will remain - our compass: now more than ever, we shall stay the course.

Taking action now...

Mobilising the financial community is vital if we are to achieve the sustainable development goals set by the UN (SDGs) for 2030 and reach carbon-neutrality by 2050: according to estimates, investments of 7,000 billion dollars will be needed every year¹ - which can only be partly covered by public authorities. This lends legitimacy to a community that supports corporate players as they respond to societal and environmental challenges, and seeks to generate impact, in order to foster a steady and harmonious transition – while also meeting profitability goals.

... to keep on track

Many companies are aware they need to act and offer solutions addressing the sustainable development goals. They understand that the “road to impact” generates innovation and levers for growth. It also creates employment and long-term value.

By integrating impact into your investment strategies, you enable these companies to ramp up the development of long-lasting and virtuous business models. You support entrepreneurs in their quest for innovation as they develop new solutions for our future. By emphasising accountability and long-term value creation, you help direct the capital needed to finance the transformation of these models.

Thank you for engaging with us, for doing what’s right and for giving a sense of purpose to your investments. In doing so, you contribute to creating a fairer and more sustainable future for us all.

This year has also been full of challenges for impact management, in which context Mirova has continued to develop its human resources.

We remain consistent

Mirova was created to offer investors funds delivering positive environmental impact and medium-term financial performance. Since 2012, Mirova's bond managers have supported the development of the green and sustainable bond market through conviction-based investments and commitments. At the same time, we have also invested in the debt of conventional issuers whose activities make a significant contribution to the Sustainable Development Goals without negative externalities.

The environmental transition is a genuine industrial revolution, and therefore a real source of opportunities, with its recurring share of winners and losers. The development of new technologies fuelled by Artificial Intelligence and electric mobility is increasing energy requirements. However, renewable energies (especially solar and onshore wind power) are currently profitable without subsidies. Their massive development requires investment in energy storage, smart grids, energy efficiency... the entire ecosystem thus built will be a source of return in the medium term. It is therefore possible to reconcile impact and financial performance. This is the objective of our management team, in order to enhance the value of the savings entrusted to us.

After 2022 was marked by a number of shocks, including the war in Ukraine, inflation and the consequent rise in interest rates, issuers preferred to postpone their financing needs, whether in green and sustainable bonds or conventional bonds. In 2023, despite even higher interest rates accompanied by geopolitical tensions and instabilities in the US financial system, new issuers from various geographical areas entered the green bond market, bringing this universe closer to a conventional bond universe. This year has also been full of challenges for impact management, in which context Mirova has continued to develop its human resources (ESG analysts, credit analysts, managers) and its databases in order to better filter this universe. Our engagement policy has also been strengthened, by developing discussions with our issuers.

Hopes for the year ahead

In response to this global challenge, the arrival of new American and Asian issuers, as well as new, shorter-dated sovereign issues, will be useful for the diversification of our strategy, although the continuing trend towards market expansion will be mechanically accompanied by a shortening of maturities.

We therefore expect the green bond market to grow by an average of 10% p.a. in terms of volume between now and 2030, with the market growing at a faster pace. From 2026 onwards, the market will resume its acceleration with the arrival of taxonomy data, increasingly mature and standardized ESG reporting and a recovery in the real estate market. Each player must play its part in the market: manufacturers must invest, and investors must provide financing.