When climate change mitigation rhymes with technological innovation
The world and the economy today are facing long-term challenges such as resource security, a need to keep ecosystems healthy, and climate stability. Since there is no Planet B to turn to, it is a matter for all to work for the environmental and energy transition’s acceleration. Finance is no exception and has a role to play to reach carbon neutrality in 2050 and therefore limit temperatures increase to 1.5°C.1
Investments can also contribute to the transition to an economy that gives back to the planet more than it takes out in resources, and helps improving biodiversity. This is the purpose of the Mirova Global Environmental Equity strategy, a theme-based equity strategy aiming to invest in companies which develop robust solutions and cutting-edge services that generate a significant impact on the environmental value chain, in particular in energy and the rapid reduction of greenhouse gas emissions.
The Mirova Global Environmental Equity strategy at a glance2
- Goal: Support the energy and environmental transition to reach the Net Zero by 2050 target.
- Financing requirements estimated at 4 trillion dollars to reach carbon net zero by 20503.
- An approach focusing on 6 eco-activities: sustainable waste and water management, sustainable agriculture, green buildings, industrial energy efficiency, renewable energy, clean transport.
- Disruptive technologies from all over the world, mainly in North America, Europe and Asia.
- 40 to 60 companies in the portfolio to achieve a dual goal of financial performance and positive environmental impact4
Carbon dioxide emissions: heading towards an all-time record
In spite of the many promises and the pledges of governments to address the causes of global warming, CO2 emissions from energy and industry have increased by 60% since the signature of the United Nations Framework Convention on Climate in 19925. While the pledges are there for all to see: the 2015 Paris Agreement, hydrogen plans in Europe and Korea, the Biden Infrastructure Plan in the USA launched in 2021 (with targets including the installation of 500,000 charging points and 50% clean car sales in 20306); this is still insufficient: indeed, despite an increasing number of actions all over the world, they still fall considerably short of what is required to limit the global temperature rise to 1.5% C°.
If this trajectory continues unabated, emissions will rise by 16% by 2030 compared with 2010, resulting in a 2.7% temperature increase by the end of the century7.
Of the nearly 34 Gt of carbon dioxide emitted worldwide in 2020, more than a third – representing 13.5 Gt – of this is due to electricity generation and heating. 8.5 Gt is emitted by industry, 7.2 Gt by the transport sector and approximately 3 Gt by buildings8.
These figures and percentages vary, however, from one country to another. In the United States, for example,transport is responsible for a third of carbon emissions, while a quarter is caused by power generation9.
And while the International Energy Agency forecasts a record emissions increase for 2023, it reminds us that, to attain Net Zero in 2050, our emissions should not be allowed to rise above 27.9 Gt… in 202510!
Reversing this trend has therefore becomea matter of urgency.
With the Mirova Global Environmental Equity strategy, we invest in companies whose innovative solutions contribute to reducing emissions along their entire value chain. This involves using biowaste valorization, thereby avoiding emissiongenerating extraction processes, but also substituting polluting products. These companies, their solutions and their services can contribute to meeting the goal of Net zero by 2050, while helping preserve resources and biodiversity.
Innovate to decarbonise
Reaching the Net Zero target therefore entails massively and urgently decarbonising the entirety of our economy, with a priority focus on the highest emitting sectors.
Annual clean energy investment will need to more than triple by 2030 to around $4 trillion11.
Between now and 2030, we must also massively deploy all the renewable energy technologies already available on the market today. In 2050, almost half of the emissions reductions will be achieved by technology which is only at the demonstration or prototype stage today.
Substantial innovation efforts must therefore be deployed during the coming decade so that these new technologies can be brought to market in a timely manner and on a wide scale.
Mirova Global Environmental Equity Strategy: capturing opportunities offered by the energy and environmental transition, precisely where they arise.
The Mirova Global Environmental Equity strategy is designed with this in mind. It is a global equity portfolio invested in companies which operate all over the world and provide, according to Mirova,cutting-edge solutions and disruptive services capable of having a positive impact on the planet and society. Its aim: to engage in taking and effective action in response to global warming by aiming for a 100% zero carbon economy by 2050, while promoting the protection of resources and the resilience of ecosystems.
The Mirova Global Environmental Equity strategy thus combines strong environmental and social impact with the goal of financial performance by investing in green technology that provides structural growth opportunities over several decades.
There is a major difference between companies with good environmental practices and those that bring solutions to the table, notably disruptive solutions, to address the challenges of global warming. These are the companies that we are seeking to identify with the Mirova Global Environmental Equity strategy. With this solution, investors can place the environmental and energy transition at the centre of their portfolio by participating in decarbonisation through innovation.
At the core of the Mirova Global Environmental Equity strategy
Global leader in biofuels and leading global producer of natural sustainable ingredients.
In order to reach Net Zero by 2050, the production of liquid biofuels must quadruple between 2020 and 2050, supported by the development of sustainable biomass supply chains.
It is this target - among others - that Darling, established across five continents, seeks to address by optimising natural resources to cater to growing demand for food and fuel.
- 71%: US renewable diesel production Compound Annual Growth Rate (2020 -2024)1212
- 36%: Darling’s renewable diesel production: Compound Annual Growth Rate (2019-2022)13
The solution to feed the circular economy:
Made from repurposed animal fats, organic residuals or oil and grease collected from restaurants, Darling’s biofuels contribute towards a paradigm shift in the world’s long-term energy balance. Darling thereby contributes to reducing competition in the use of agricultural land prompted by increased interest in vegetable oil as an alternative to petrochemical inputs, and in so doing, reduces the impact of intensive agriculture on biodiversity and water
"Renewable diesel reduces life cycle greenhouse gas emissions Up to 80% vs carbon based alternatives" (Source: Diamond Green Diesel)
A leading residential solar, storage and energy services company.
In order to reach Net Zero by 2050, solar and photovoltaic power must account for 33% of power generation in 2050, versus 3% in 2020.
This is the target - among others - that Sunrun seeks to address, by helping its customers become energy self-sufficient using solar.
- 15%: US solar panel Compound Annual Growth Rate (2011-2031)14
- 32%: Number of customers Compound Annual Growth Rate (2019-2025) for Sunrun15
The standout solution:
Converting to solar power and turning your house into a “power plant” is a
big step that many people might not easily take.
By deploying an array of personalised services and tailored solutions (online training, incentives and tax breaks, the sizing and customisation of the solar system [solar panels, generators, batteries, EV charger], lease plans, warranty and insurance), Sunrun facilitates and accelerates the adoption and development of solar energy.
"Sunrun’s systems have prevented greenhouse gas (GHG) emissions
totaling 8.1 million metric tons." (Source: Sunrun)
Doosan Fuel Cell
One of the biggest manufacturers of stationary fuel cells.
In order to reach Net Zero by 2050, the production of low-carbon hydrogen must reach 520 Mt in 2050, versus 9Mt only in 2020.
It is this target - among others - that Doosan Fuel Cell seeks to address by manufacturing hydrogen-based electricity production/storage systems.
- 15 GW: Korean fuel cell market Compound Annual Growth Rate (2020-40)16
- 55 %: Revenue Compound Annual Growth Rate(2019-22)17
Among the services and products developed by Doosan Fuel Cell, “Pure- Cell® Model 400 Hydrogen” is a stationary module powered by hydrogen, with the capability to produce electricity with a rated power of 440kW, as well as a heat supply to 120°C.
"Combined with fuel cell, hydrogen is an energy vector without local CO2 emission, that only releases water."
About: The Mirova Global Environmental Equity strategy
3 interconnected global challenges
- Climate stability
- Resource security
- Healthy ecosystems
3 investment zones targeting leaders in green, innovative and economic technology
- Distributed solar power and storage
- Fuel cells
- Industrial eco-efficiency
- Onshore and offshore wind turbines
- Bioplastics and Recycling
- Battery Electric Vehicles (BEV) and Fuel Cell Vehicles (FCV)
6 themes to contribute to the environmental and energy transition in a global way
- Sustainable waste and water management: sustainable water resource management, waste processing and recycling, biogas, circular economy
- Sustainable agriculture: organic and integrated agriculture, sustainable forestry
- Green buildings: insulation, renewable energy construction technology
- Industrial energy efficiency: lowconsumption electric engines, process optimisation
- Renewable energy: solar, hydropower, geothermal, wind – and storage
- Clean transport: electric vehicles, hydrogen-powered buses and rail / maritime / road transportation
1 portfolio made up of 40 to 60 companies offering structural growth and a competitive advantage
- Preferably exposed to disruptive innovation
- Evaluated according to the competitive merits of the proposed technology or service, the quality and supportability of their management, their business model, balance sheet and upside potential
1. The Paris Agreement’s central aim is to strengthen the global response to the threat of climatechange by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial
levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius.
2. The specific risks of investing in the strategy are linked to: Capital loss, Equity securities, Global Investing,
Emerging Markets, ESG Driven Investments, Small, Mid and Large Capitalization Companies,
Exchange rates, Portfolio concentration, Changes in laws and/or tax regimes, Financial Derivatives
3. Source: https://www.iea.org/reports/net-zero-by-2050
4. Source: Mirova as of 09/30/2021. The information provided are subject to change without notice.
5. Source: https://www.iea.org/reports/net-zero-by-2050
6. Source: https://www.lemonde.fr/international/article/2021/08/07/aux-etats-unis-le-gigantesque-plan-de-
modernisation-des-infrastructures-voulu-par-joe-biden-franchit-une-etape-cle_6090870_3210.html (in French)
7. Source: United in Science 2021
8. Source: https://www.iea.org/reports/net-zero-by-2050
9. Source: https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions
10. Source: https://www.futura-sciences.com/planete/actualites/rechauffement-climatique-vers-nouveau-record-emissions-co2-92584/ (in French)
11. Source: https://www.iea.org/reports/net-zero-by-2050
12. Energy Information Administration
13. Source: Darling Ingredients. This data relates to Diamond Green Diesel, which is part of Darling Ingredients.
14. Source: Bank of America
15. Source: Sunrun
16. Source: Bernstein estimate
17. Source: Bloomberg consensusThe information and perspective provided reflect Mirova’s opinion as of the date of this document and are subject to change without notice.
As sustainable investment is confirmed both as a crucial need and a growing trend, climate and ESG1 corporate disclosures remain on top of regulators and investors’ agenda. The European Union (EU) is currently revising its requirements for corporates sustainability disclosure (Corporate Sustainability Reporting Directive or CSRD). International bodies, the International Financial Reporting Standards (IFRS) and International Organization of Securities Commissions (IOSCO), are aiming for a climate disclosure “building block” to align practices at the global level. In June, the US Securities and Exchange Commission (SEC) finalized a public consultation on corporate climate disclosures, to which Mirova responded. We share below our convictions that we have conveyed to the SEC and across various jurisdictions and initiatives (the EU, TCFD2…) in order to build robust, meaningful and useful frameworks for corporate climate and sustainability disclosure.
Natixis Investment Managers and Mirova invite you to join a journey towards a more sustainable world. Because many opportunities arise from the most profound upheavals, Green Vision invites you to discover how players from different sectors can contribute to the transition towards a more sustainable model and revolutionise the way you think about your investments. Mirova's ESG experts will provide you with the insight to identify the risks and opportunities of these sectors.
The Article 173 of the French Law on energy and transition for Green Growth requires French investors to communicate how environmental, social, and governance issues are considered in their investment choices and processes. Going beyond compliance, the annual publication of our impact report is an opportunity for us to demonstrate why and how we have put sustainable development at the core of our investment policies and engagements. It is an opportunity for us to emphasize the way we create environmental and social value, while simultaneously realizing financial performance. We hope that this report strengthens the understanding and confidence in the quality of our approach as a responsible investor.