SRI/Climate Change: Q&A
Taking a responsible route to investment returns To gain insight into Responsible Investment and how climate change is increasingly impacting investment strategy, we sat down with Pascal Voisin, Chief Executive Officer at Natixis Asset Management (Natixis AM), and Carlos Joly, an international authority on climate change and Chairman of the Natixis AM Climate Change Scientific Committee, to hear their views. Considered a leader in Responsible Investment for 25 years, Parisbased Natixis Asset Management now manages more than ₏10.6 billion in a broad range of SRI and solidarity-based portfolios*. The firm expanded its commitment to responsible investing last October with the launch of the Impact Funds – Climate Change (a sub-fund of the IMPACT Funds, a Luxembourg domiciled investment company with variable share capital authorised as a UCITS. Risks of the Fund are described in detail in the prospectus). *As of 30 September 2010 Natixis Global Asset Management - Alternative Investments
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SRI/Climate Change: Q&A
Pascal, where is the focus on Responsible Investment? Voisin: Demand for more transparency and responsible corporate finance has strengthened across Europe in the aftermath of the financial crisis. This trend has helped bring more attention to social, environmental and governance matters. These questions have moved further into the mainstream, especially in the Nordic countries, the United Kingdom and France. I think the market is evolving significantly. A greater focus is now being put on Environmental, Social and Governance (ESG) issues that materially impact the business of a company. Also, with climate change a major worldwide concern today, and in light of developing legislation, we think this category should continue to capture greater market share for many years to come. Why did Natixis AM establish a Climate Change Scientific Committee, and what is its role? Voisin: As a major player in Responsible Investment, Natixis AM has felt a natural obligation to explore the implications of climate change for investment strategy. That said, we are very mindful that climate change is a complex and constantly evolving issue. So to better understand, anticipate and evaluate climate and regulatory issues, we decided to rely on the expertise of renowned experts on climate change through the establishment of a Scientific Committee. I’m pleased to say our committee is chaired by Carlos, who as you may know is a co-founder of the United Nations Principles for Responsible Investment. He is joined by eight experts with varied and complementary specialities, such as climatology, geology, energy, green building and government regulation. Our investment management team draws on the
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research work of the Scientific Committee. Through the committee’s research, the portfolio management team for our Impact – Climate Change Fund has defined ten key themes related to climate change. These themes serve as a guide for investment ideas and help us get a better understanding of new opportunities and risks. Carlos, what is the impact of climate change? Joly: Global warming is an undeniable phenomenon that should have serious consequences to society. Its repercussions are already being felt. Human activity has led to a sharp increase in the concentration of greenhouse gases in the atmosphere. This concentration largely explains the phenomenon of climate change. Over the past 100 years, the climate has shown an average increase of nearly 1°C in the earth’s temperature. When we consider that a difference of 4-6°C was enough for the earth to move from the ice age into our current climate, this phenomenon becomes quite worrisome. Global warming expresses itself through the increasing frequency and severity of extreme weather events, including hurricanes, floods, torrential downpours, droughts and heat waves which lead to forest fires. The concentration of carbon dioxide equivalent in the atmosphere is now only 70 parts per million away from reaching its saturation threshold of 500 parts per million. Once this threshold has been reached, the increase in average temperature is expected to have catastrophic and irreversible consequences. Voisin: Clearly, no business sector, no industry, and no company will be left untouched by climate change. But this is not only a future issue. It is already affecting many aspects of the global economy.
Natixis Global Asset Management - Alternative Investments
SRI/Climate Change: Q&A
‘As a major player in Responsible Investment, Natixis AM has felt a natural obligation to explore the implications of climate change for investment strategy’ Pascal Voisin Chief Executive Officer Natixis Asset Management
Natixis Global Asset Management - Alternative Investments
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SRI/Climate Change: Q&A
Why include climate change in an investment strategy? Joly: There are three reasons. First, it’s serious, it’s real and it’s already happening. Second, it’s on the political agenda. Regulations are changing as a result of that. Businesses are beginning to respond, and it is affecting the value of land, real estate and certain industrial assets. Finally, climate change is generally not yet in the price of equities or the valuation of companies. This opens up many interesting investment opportunities in the short, medium, and long term. Voisin: For an investor that is interested in preserving and growing patrimony, integrating climate change in an investment strategy from a global multi-sector point of view becomes necessary. Climate change must be understood today, as well as in a mid- and long-term context. It can no longer be ignored when allocating assets or selecting securities within the context of ‘sustainable management’. That’s why Natixis Asset Management has decided to give climate change and its effects a front seat in our investment strategy. What is the main objective of Impact Funds – Climate Change? Voisin: Well, like all our funds, its purpose is to make satisfactory returns for our clients. Our Climate Change fund is a global equity fund that invests in companies whose activities contribute to mitigating carbon emissions, adapting to the consequences of climate change, or that seek a better management of natural resources. We believe combining serious attention to these matters with robust financial analysis is a winning strategy. Since climate change is a worldwide challenge,
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the Fund has an international geographic coverage, including emerging markets. For instance, one key theme where we are finding interesting opportunities is sustainable land management, forestry and agriculture. We look for products that raise agricultural yields, against a backdrop of increasingly scarce cultivatable acreage and constantly rising demand for food. Within this sustainable land management theme we are finding investment opportunities with producers of mineral fertilisers, certain companies holding forestry assets, and certain manufacturers of agricultural equipment and materials. We of course recognise that the products or services that these companies offer must be environmentally sound. The opinions expressed in this communication are those of the interviewee(s) and interviewer(s) as referenced. Opinions are subject to change at any time and there can be no assurance that developments will transpire as forecasted. The information is dated as indicated and cannot be relied upon as current thereafter.
For more information on Natixis AM climate change expertise, including Carlos Joly’s whitepaper, videos, and thematic opportunities, go to www.am.natixis.com/ climatechange
Natixis Global Asset Management - Alternative Investments