Natixis AM Deputy CEO Zaouati outlines the build up of RI/sustainability boutique Mirova

France’s Natixis Asset Management (NAM), the €286.5bn fund manager, made a bold statement in November 2012 with the launch of a dedicated responsible investment arm, Mirova, headed by Deputy CEO, Philippe Zaouati. The new unit will start building upon its existing €4bn in sustainable equity funds early this year with the launch of a new flagship global fund, a Luxembourg-based SICAV. Speaking to Responsible-investor.com, Zaouati says Natixis will also add to its range of impact investment funds (which are included in the equity funds tally) during the year. The Natixis chief says rolling out a distinctive sustainability brand reflects the French bank’s multi-boutique model of individual and ‘visible’ investment management units. It has done the same with other business lines including smart indices and alternative equities. In Zaouati, who started his career over 20 years ago as a quant portfolio manager, Mirova has a passionate but pragmatic backer. In 2009, he wrote a strong book about the application of RI into institutional investment – albeit in French only –‘Investir responsable, en quête de nouvelles valeurs pour la finance’, which he was inspired to write by the 2008 financial crisis.
He currently chairs the Responsible Working Group of the European Fund and Asset Management Association (EFAMA), and is a board member of the International Corporate Governance Network (ICGN). Mirova, which started with 36 employees, is based around four areas of money management. The first is dedicated listed equities funds based on eight sustainable themes: energy, buildings/cities, mobility, consumption, resources, healthcare, ICT and finance). The funds have no sustainability revenues threshold for investee companies but are based on manager conviction as tohow embedded sustainability is in the firm. The funds aim to find companies that can profit from major technology ruptures. Jens Peers, former Head of Environmental Portfolio Management at Dublin-based Kleinwort Benson Investors (KBI), was pulled in at the start of this year as Chief Investment Officer, Sustainable Equities, reporting to Zaouati, who says the firm aims to recruit more staff with international expansion in mind. Mirova’s second line is sustainable infrastructure investment, where it provides research for funds managed by Natixis Environnement & Infrastructures, notably in public private project investment projects and debt funds. Zaouati says the firm has looked at green bonds but doesn’t see enough of a market yet to launch product. Third is its impact investing fund range and fourth is the voting and engagement done for €20.4bn in Natixis AM group assets where Zaouati believes it can set itself apart by levering developed environmental and social research into the traditional Anglo Saxon financial governance model. Overall, he says Mirova’s creation reflects Natixis’ belief that the ESG market is developing in two directions. First, he says, is the mainstreaming of ESG into all portfolio decisions where it becomes standardized and systematized. Mirova is now the entity carrying out ESG research for €7.7bn in NAM internal assets (ex equities). This ESG capacity helped NAM last year win corporate bond and inflation-linked bond mandates of about €700m from Ircantec, the €5.9bn French public pension fund. Second, he says, is the specialist funds approach based around sustainable development, which Mirova will exclusively develop within the manager. Natixis AM CEO Pascal Voisin has said he wants to see Mirova become an international leader in the sustainable investing field. While
Mirova doesn’t have any direct meaning, Zaouati says it was inspired by Mirovia, a hypothesised historical super ocean, which took its name from the Russian мировой or mirovoy, meaning ‘global’. The firm has gone outside of France to launch a responsible investment partnership with the University of Cambridge’s Programme for Sustainability Leadership where it is sponsoring the asset management stream. Additionally, Zaouati says Mirova will release publicly available sustainability research with the aim of promoting the sector. It will be interesting, however, to see how far Mirova gets in building its international capacity, particularly with some of NAM’s own US affiliate managers such as Harris Associates or Loomis Sayles.It will also be instructive to see how a separate RI brand fares in the French market. The last similar RI subsidiary of a local manager, IDEAM, was pulled back into parent firm, Amundi, at the end of 2011. Mirova may only represent a relatively small part of NAM’s total business, but Zaouati is optimistic about client demand. But, he says, the RI sector as a whole needs to focus on its primary financial goal: “We need to get out of this sense of bureaucratic SRI, it needs to be about performance because if we forget that it won’t be anything.”