An interview with Samantha Stephens, SRI Analyst at Mirova, about sustainable finance for business.
What changes are you seeing in how companies are financed? Have you noticed any positive developments in sustainable finance?
Sustainable finance is booming. Investors specializing in Socially Responsible Investing (SRI) are paying increasingly close attention to Environmental, Social, and Governance (ESG) criteria, as are mainstream investors. Their focus is no longer solely on risk management, but more on the opportunities present, which wasn’t yet the case just a few years ago. Investors are paying a lot of attention to companies’ exposure to climatic risks, for example.
Investors, businesses, and regulators all support the development of sustainable finance, as does civil society which now wants to invest more responsibly. The work of the European Commission’s High Level Expert Group (HLEG) on Sustainable Finance is also helping to build the market. Their work produced an “action plan for a greener and cleaner economy”. Published by the European Commission, its measures included the announcement of a work group that would publish an initial taxonomy of sustainable assets in 2019, first on climate change, and then on other environmental activities. Over the next few years, investors will be saying more about their expectations when it comes to reporting, especially on the optimal time scale for the expected financial indicators and ESG data. Accounting obligations will also be more focused on taking ESG criteria into account, which are becoming increasingly relevant to investment.
How do you build environmental concerns into your financing processes?
We believe that finance is a powerful tool that can transform society: it helps build tomorrow’s world. As a result, we are working to develop a kind of sustainable finance that takes the challenges and issues of a sustainable economy into account. To do this, we propose innovative investment solutions intended to reduce social and environmental impact, all while taking long term financial health into account. We track ESG criteria in all of our investments (equity funds, bond funds, infrastructure funds, etc.). In assessing them, we leverage the hard work of our research team, each member of which is dedicated to a particular sector. We also look at risk and opportunity management, as well as taking the United Nations’ Sustainable Development Goals into account. Climate change is one of the major transitions that we are analyzing, alongside demographics, digitalization, and transparency in corporate governance. For the energy sector, we are mainly tracking issues relating to renewable energies, fossil fuels, and energy efficiency. While every business sector shares the same environmental concerns, the energy sector, which feeds into the entire economy, plays a leading role. The energy sector has undergone some profound changes in recent years, and ENGIE is a great example of this, having chosen to redirect its attention to low carbon energies, and boasting a 90% complete transformation plan.
Do you think that integrated thinking, which sets out to measure overall performance (financial and extra-financial), is important? If so, why? Do you see any trends in its uptake by investors?
For SRI analysts, it is very interesting to get our hands on integrated reports, especially when a real connection is made between sustainable development and strategy. This is particularly true with ENGIE’s integrated report, which presents a single, unified message: it contains ideas for both the short and long term, in which sustainable development is fully incorporated into the Group’s strategy. In this fifth edition of its integrated report, ENGIE presents value creation with regard to major trends in society, material challenges for the Group and its stakeholders, and the United Nations’ Sustainable Development Goals. By producing its integrated report, ENGIE is in sync with the current direction of sustainable finance.