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MIROVA ENGAGEMENT

POLICY AND REPORT

2017

C1 - Public Natixis

C1 - Public Natixis

EDITORIAL

Mirova’s investment strategy is based on the conviction that

sustainable development is a source of profitable innovation. This

strategy allows us to ensure sustainable performance for our clients

over the medium- and long-term. Investment that integrates the

opportunities and challenges of sustainable development not only

provides financial benefits but also has indirect positive effects on

the economy that benefit long-term performance. Having an

ambitious engagement policy multiplies these effects while also

enriching Mirova’s knowledge on sustainable development and the

changes they are having on our society.

As a responsible investor, Mirova seeks to multiply the effects of our

investment choices through a proactive engagement approach not

only with our assets but also with economic and political policy

makers to promote an environment conducive to responsible

investing.

Facing the urgency of issues related to climate change and still

catching momentum of the Paris Accord end of 2015, our 2017

engagement continued to focus on climate issues and to promote

more widely the integration of sustainability into business models.

Companies were thus encouraged to improve on their carbon

reporting, provide indicators with regards to water and waste and

develop solutions to tackle these different issues. For green bonds,

it remains important to maintain integrity in the market through the

projects to be financed and the quality of the annual green bond

reports. Mirova’s collaborative engagement also garnered progress

this year when Mirova hosted an investor workshop together with

the Sustainable Apparel Coalition on how to address transparency in

the supply chain of the footwear and garment industry.

2017 was also filled with advocacy towards promoting sustainable

finance through work done with the European Commission’s High-

Level Expert Group (HLEG) on Sustainable Finance – which our CEO

was selected to be a part of – and the work done with Finance for

Tomorrow (formerly known as Paris Green and Sustainable Finance

Initiative), wherein the Chairman is our CEO. With this work, Mirova

is planting the seeds for a more sustainable financial industry.

Enjoy!

Mathilde Dufour

Co-head of Responsible Investment Research

4 Document intended for professional clients only in accordance with MIFID


TABLE OF CONTENTS

Mirova’s Engagement Strategy 6

Individual Engagement 8

Summary and Key Figures 8

1.1 Improving Practices of Listed Companies in all Mirova Investment Fields 10

1.2 Influence via Exercise of Voting Rights 27

1.3 Improving Green and Social Bond Issuance Practices 31

1.4 Responsible Infrastructure 34

Collaborative Engagement Initiatives 37


2.1 Collaborative Engagement Strategy 38

2.2 Mirova’s Engagement Platform 40

2.3 Other Collaborative Initiatives 47

2.4 PRI Engagement Platform Initiatives 52

Advocacy for Improving and Developing the Responsible

Investment (RI) Market 55


3.1 Advocacy: How it Works 56

3.2 Mirova’s Advocacy Objectives 57

3.3 Investor Statements signed in 2017 58

3.4 Financial Centre Considerations 60

3.5 Specific 2017 Activities 63

3.6 Supporting University Research 66

Appendix 68

Individual Engagement Process 68

Collaborative Engagement Process 72

Mirova Engagement Policy and Report - 2017


Mirova’s Engagement Strategy

Engagement: A Tool for Implementing Investment Strategies

All investors have the ability to engage with and influence economic players in their role as a

current or potential investor. With this in mind, many asset managers employ an engagement

strategy. The goal is to limit risks and maximise the opportunities associated with an investment.

The investor fulfils their fiduciary responsibility by actively ensuring that client interests, the final

beneficiaries, and their investment strategy are all considered by the companies in which they

invest.

A Fundamental Tool for Responsible Investors

Engagement is a particularly important tool for responsible investors looking to create long-term

value. Committed to responsible investment, investors take a stand on ESG (Environmental, Social,

and Governance) issues and work with targeted companies to improve their practices in these

areas.

Engagement at Mirova

Mirova puts sustainable development at the core of its investment strategy to ensure sustained

performance for its clients over the long term.

Engagement, in addition to the integration of ESG issues into our investment decisions, thus

constitutes a primary focus of our responsible investment policy. By promoting better

environmental, social, and governance practices, both directly and indirectly, the engagement

approach seeks to create long-term value from an economic, environmental, and social point of

view. These three dimensions must converge to create conditions conducive to sustainable

economic performance over the long term.

RI MARKET REGULATORSCOMPANIES

2 OBJECTIVES

WHO DO WE ENGAGE

WITH?

3 WAYS TO

ENGAGE

MIROVA’S ENGAGEMENT STRATEGYEngaging to promote a sustainable economy

2. Improve and develop the RI market

Individual engagementon-going engagement + exercise of voting rights

Collaborative engagementwith companies, industries, and at policy

level

Advocacyfor public policy and RI market standards

WHO IS ENGAGING?

1. Improve company practices(product sustainability impact & ESG process)

• Companies at an individual level

• Several companies in the same sector• Sector / Professional associations• Regulators• Relevant stakeholders (NGOs, etc)

FINAL TARGET

• RI sector / professional associations• Public policy makers / public regulators• Relevant stakeholders (International

Organizations, NGOs, etc)

or / and

Mirova

Other investors (institutional investors, asset managers)



MIROVA’S ENGAGEMENT STRATEGY: TWO GOALS & THREE PILLARS

Mirova’s engagement strategy has two goals:

1. Improve companies’ products and practices from an environmental, social and

governance point of view for those held in the portfolio or for potential investments.

In order to do so, Mirova relies on the unique experience of its research team dedicated to ESG

analysis. This goal is implemented through two types of engagement:

Individual engagement - whereby Mirova’s Responsible Investment (RI) analysts interact

one-on-one with the companies most represented in its portfolios and that of its clients to

encourage improvement in ESG practices. This dialogue is an integral part of Mirova’s ESG

analysis and exercise of voting rights;

Collaborative engagement – whereby controversial practices are identified at the

industry level or for a group of companies, and a dialogue is opened to request greater

transparency and, if necessary, changes in controversial practices. To increase the

responsible investors’ level of influence, these actions are often undertaken by several

investors united under a common goal.

As part of this strategy, Mirova launched its own collaborative engagement platform, consisting of

its own experts and client representatives. The goal of this platform is to create a tool for

influencing the most controversial practices of companies and financial centre organisations

through close interaction.

2. Apply its investment vision to its own market to improve the financial sector’s

standards and regulations to encourage sustainable investment and long-term practices.

The purpose of this goal is to coordinate Mirova’s engagement, based on its responsible investment

policy, with the structuring of the responsible investment market. Via its advocacy Mirova is

committed to promoting regulations (including legislative changes, standards, and labels) and

practices for financial centre players that encourage sustainable investment, which, in turn, creates

long-term value.



Individual Engagement

Summary and Key Figures

Individual engagement consists of dialogue with the companies most represented in Mirova’s

portfolios and that of its clients to encourage improvement in ESG practices. This dialogue is an

integral part of Mirova’s ESG analysis for all its asset classes: equity, fixed-income (with specific

engagement for green and social bonds), and infrastructure.

ENGAGEMENT FOR LISTED EQUITIES (p.10)

374 meetings were conducted with targeted

companies on a range of different

environmental, social, and governance issues.

‘’282 companies targeted



VOTING (p.27)

64 pre-general assembly

meetings were conducted with

companies to specifically discuss

different general assembly and

other governance issues.

GREEN AND SOCIAL BONDS (p.31)

Meetings with issuers consist of discussions around the

four different aspects of green and social bonds.

RESPONSIBLE INFRASTRUCTURE (p.32)

Main Topics

Environmental & social reporting

Employment dynamics

Quantification of positive impacts

Mitigation of main E&S risks (energy management, nuisances, accidents, etc.)

‘’36% average opposition rate* for

2017 vs. 30% in 2016

* votes against and abstentions

Use of proceeds

Mitigation of ESG risks

Impact measurement

Quality of reporting

‘’48 issuers targeted

‘’45 projects subject to engagement



1.1 Improving Practices of Listed Companies in all Mirova

Investment Fields

The goal of individual engagement is to change ESG practices through continuous dialogue carried

throughout the year, every year. This dialogue could pertain to ESG changes for issuers, exercise

of voting rights, or could follow a major event revealing important deficiencies in company

practices.

The primary characteristics of this approach are as follows:

Overarching

Engagement relates to all points for improvement identified during the assessment of ESG

practises or the analysis of resolutions presented at general meetings.

Ongoing

Engagement is conducted throughout the entire investment process. It takes the form of

meetings set up by Mirova’s research teams or by the companies themselves at annual

extra-financial roadshows, appointments, or general meetings.

Intensive

Engagement is conducted according to a list of key values that represent the main positions

of Mirova and its clients. The goal is to attain short-term or medium-term objectives,

depending on the complexity of the engagement issue.

Over the course of 2017, Mirova engaged with 282 companies representing 74% of Mirova’s

equity portfolios held in its own funds and that of its clients through 374 meetings and

contact with the targeted companies.

Beyond the issues specific to each company, we chose to continue to focus on several issues across

the board:

• Sustainable development governance: Continuing our efforts from 2016, we worked on

increasing company awareness of the need to create a sustainable development committee on

the Board, introduce extra-financial criteria in executive directors’ variable remuneration, and

publish audited and certified Corporate Social Responsibility (CSR) reports.

• Pay-equity: To ensure that the value created is equally shared amongst all stakeholders,

Mirova has been discussing with companies the ways they measure the equity in the distribution

of the value created and the different ways they put this into practice.

• Carbon reporting: For companies with a considerable carbon impact, we recommended that

they use a life cycle-based analysis to better understand not only the direct impact of processes

but also that of products and services and the company’s potential to contribute to emissions

reduction.

‘’282 companies targeted in 2017

vs. 196 companies in 2016



Buildings and Cities

Issues

The buildings and cities industry is subject to considerable sustainable development issues:

climate (due to the sector’s high energy consumption) and housing (in terms of basic rights).

Our engagement is therefore focused on solutions that meet these challenges, i.e. optimising

buildings’ energy efficiency and creating resilient, decent, and affordable housing. Companies

in this industry are exposed to other direct environmental and social risks: respect of

international work standards, and the impact of production processes (extraction, production,

construction sites) on the environment, particularly local biodiversity.

Principal Actions in 2017

For construction companies, as they are limited by their clients’ specifications, our requests

primarily had to do with transparency for the current building stock (e.g. distribution of buildings

by energy efficiency and proportion of accessible housing) and establishment of offers that

encourage clients to adopt these solutions (i.e. less expensive offers for green options). In our

exchanges with construction materials companies, we encouraged transparent communication

in terms of their exposure to and use of environmentally and socially beneficial products

(insulation, low-energy lighting, elements generating renewable energy, materials adapted to

natural disasters, low-cost materials, etc.).

Building supply companies are, nevertheless, particularly well positioned to meet green building

challenges through solutions to reduce energy and resource consumptions. For these kinds of

companies, engagement actions are more focused on the disclosure of revenue and investments

related to highly energy-efficient solutions such as heating, cooling and lighting solutions as

well as the portion of renewable energy in the building energy mix.

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Biodiversity

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Employee Relations

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SupplyChain

Development of green and social products

Environmental and social benefits of products

Job creation

Number of engagement actions on opportunities

Number of engagement actions on risks


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In terms of direct environmental and social risks, our discussions encouraged establishing

performance criteria, medium- and long-term goals, and annual changes in the sales revenue

related to these elements. These can include changes in accident/incident rates for all workers

(including subcontractors), the number of extraction sites covered by a biodiversity plan or

construction sites covered by a green site charter and the performance of these plans, e.g.

changes in energy consumption on production sites. The building industry is also highly subject

to poor practices in business ethics such as corruption and price fixing. The structure established

to prevent these practices and potential controversies were thus also discussed, including

mechanisms encouraging the integration of sustainable development risks in company

governance structures (creation of a dedicated board committee, etc.).

Engagement in Action: Owens Corning

Owens Corning is the global leader in glass fibre and a leading producer of building products. It

operates in three main businesses: insulation, roofing and composites.

In 2017, we dialogued on both the company’s exposure to eco-friendly solutions and on its

sustainability risk management with Owens Corning’s management. The company presented

detailed elements allowing us to understand its exposure to this type of products, which can be

end-products such as insulation products but also “ingredients” for end-use products made by

other companies as for the wind market or the automotive market. To communicate about the

materiality of these gains, Owens Corning indicated that for end-use products, these take the

form of Environmental Product Declarations and Life Cycle Assessments and concerning the

composites part they partner with their customers to provide them the LCA data enabling them

to represent the impacts of the final products.

Given that one of the company’s main contribution to the environment is through the climate

benefits their products can provide, Mirova highly encouraged the company to also measure its

scope 3 emissions. In 2017, the company had informed us that they will launch a supplier

initiative focused on scope 3 emissions. Mirova then hopes that this will be the first step in the

company’s evaluation of its emissions throughout its entire value chain.



Consumption

Issues

In terms of opportunities, companies in the consumption industry can play an active role by

creating products that allow their consumers access to a more sustainable lifestyle such as

healthy and nutritious food and drink or certified ecological and/or social products. Companies

can also use tools such as their marketing campaigns and product packaging to inform their

consumers of how they can use their products in a more sustainable way and further encourage

sustainable behaviour.

The environmental and social impacts of companies in the sector are relatively similar, although

they appear at different tiers according to the sector: human rights violations, such as child

labour or forced labour, poor working conditions, and deficient waste and water management.

As with most companies that externalise their production, most of environmental and social

impacts come from the supply chain – from harvesting raw materials to manufacturing. In terms

of direct social impacts, companies in the retail sector tend to be big employers in their countries

of operation. Here the type of employment is usually low-skilled work and therefore highly

susceptible to labour rights controversies. As such, companies need to have fair working policies

and practices that respect the right to associate and collective bargaining as a minimum.

Furthermore, companies in this sector should have in place the necessary mechanisms to ensure

that their products are safe for consumption.


Similar to 2016, engagement in 2017 focused on how companies can improve the social and

environmental benefits of their products, for example, their health and nutrition profile for food

producers and the biodegradability of their products for home and personal care companies. In

the food industry, for example, there is a growing demand from consumers who want to

consumer less animal-based products and are thus looking for more plant-based protein.

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Health & Safety

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Employee Relations

Biodiversity

Climate change

Resources scarcity

Consumer Protection

SupplyChain


Job creation





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Consumers are also actively looking for home and personal care products that have a smaller

impact on the environment. These market trends are clear examples of how companies can find

growth in addressing sustainability issues. A strong emphasis was also put on how companies

can use their marketing know-how to encourage more sustainable use of their products and

more sustainable behaviour overall in their consumers.

Social and environmental risks in the supply chain were also frequently discussed. A focus for

this year are the labour rights violations in the agricultural supply chain most notably child

labour in the cocoa farms. There’s also been a slight increase in public commitments from

companies to fully trace their key raw materials to the farm. However, these commitments still

represent a small part of the market and thus traceability will continue to be a focus of

engagement for the following years. Promoting sustainable agriculture particularly with regards

to water efficiency, soil management and animal welfare were also frequently discussed with

several companies in the sector. Advancements have been made in with regards to

commitments and time-bound plans to reduce the use of antibiotics in livestock. However, the

steps are small as the commitment pertains to only one animal (e.g. poultry) and not yet the

entire range of animal products provided. Other engagement topics involved ensuring that

global human resources policies are well implemented in all markets where the companies are

present, most especially in countries when human resources practices are generally insufficient.

Engagement in Action: LVMH

Despite substantial efforts made by the company over the past years to better integrate

sustainability troughout its businesses, it remains difficult to understand and estimate the

group’s aggregate environmental and social impacts. That the efforts are published at a maison

level also added to this difficulty. Moreover, the company did not have public quantitative

targets with regards to the reduction of their environmental impacts.

Following several years of discussions with the company on this issue, Mirova noticed positive

changes in their strategy in 2017. With the launch of their Life 2020 Strategy at the 25th

anniversary of the company’s environmental strategy, the company has publicly committed to

ensuring that 70% of their supply chain follow the best environmental standards and that a

10% improvement on environmental performance be seen in their sites and stores by 2020.

Additionally, LVMH has integrated elements of eco-design into their Life 2020 Objectives

ensuring that impacts are thought of from the very beginning of a product’s life. Furthermore,

the company has also provided Mirova with more information regarding their in-house tool that

systematically measures the environmental impacts of its products. Furthermore, LVMH is

working on ways on how to better communicate its environmental initiatives and the progress

towards their goals. Mirova, therefore, is looking forward to reading this report, following the

progress of the company in achieving these objectives and using it as a tool to further push the

company’s environmental strategy.



Energy

Issues

The energy industry includes companies whose primary activities are related to oil and gas,

electricity and heat generation, and/or the production of industrial equipment. Because of the

inherent link between their activities and products and the global energy system, many energy

companies are poised to take advantage of the opportunities arising from the transition towards

a lower-carbon economy. However, they are also exposed to environmental risks, namely spills

and pollution, as well as health and safety risks linked to the inherent dangerousness of their

activities.


For companies heavily involved in fossil fuels, no matter whether utilities or oil and gas majors,

we continued to encourage decarbonisation in line with the consensus that limiting global

warming to 2°C would require severe emissions cuts from the energy industry. This implies

investment in renewable energy capacity and commitments to limiting new investment in fossil

fuels for utilities. We also encouraged oil and gas companies to diversify their activities away

from hydrocarbon exploration and production (both in view of the climate benefit and for long-

term regulatory, reputational, and demand risk management). To achieve these goals, we

supported concrete targets and action plans. We also advocated for energy efficiency measures

at both the company and consumer level to reduce carbon emissions throughout the entire

value chain.

For industrial companies, we continued to support the development of products providing

solutions to sustainability issues, namely renewable energy systems, energy efficiency, and

smart grids, together with improved communication and measurement of the actual

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Climate change

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environmental and/or social benefit associated with these products. One of our major challenges

in the sector is understanding what portion of the company’s products lead to positive

environmental or social impact, especially for highly diversified companies. We, thus, reiterated

our interest in more specific disclosure of environmental, social, and governance indicators.

Along the same lines, we also emphasised our support for life cycle product analyses and eco-

design.

Engagement in Action: Andritz

Andritz is one of the global leading providers of plants, equipment, and services for the pulp

and paper industry, hydropower stations, and metalworking industries. As a result, it faces high

levels of sustainability risk, in terms of managing its environmental (energy efficiency), social

(health and safety, human rights), and governance (business ethics) impacts.

Prior to 2016, the company’s reports featured anecdotal accounts of its sustainability risk

management activities, such as informal polls it conducted amongst people displaced by one of

its hydropower projects, or a specific measure undertaken to reduce pollution from one of its

manufacturing plants. However, very few indicators were disclosed, and no targets were

present. So, especially given the company’s relatively high exposure to controversy, we have

engaged regularly for improved transparency and detailed reporting on pertinent environmental

(i.e. CO2 and pollutant emissions, water use, for example) and social (i.e. health and safety,

employee training) indicators.

In 2017, Andritz added a section to its 2016 annual report that contains sustainability indicators,

including accident statistics, suppliers by region, energy consumption by fuel (and broken down

between manufacturing / offices), waste by type, and water consumption by type in

manufacturing. This marks a major improvement in transparency, which will allow us to gain a

more nuanced understanding of the evolution of the company’s sustainability performance going

forward. However, the company still has not set/disclosed targets for these metrics. So, we will

continue engaging with the company to encourage it to fix and disclose specific sustainable

development objectives, as well as action plans to achieve them.



Finance

Issues

The finance sector includes banks, insurance companies, and fund managers. The

environmental and social impacts of these companies are generally direct, and as such, most of

our actions concerned taking into account ESG criteria in their investment and financing

activities, as well as preventing business ethics risks.


In 2017, after the COP21 and the release of the recommendations of the Task Force for Climate-

related Disclosures (TCFD), we concentrated our engagement on issues related to the energy

transition and carbon-disclosure for the financial sector. First indicators from major players in

the finance industry on reducing exposure to assets that emit a lot of CO2 (oil and coal-fired

plants) and on increasing commitment to invest in and finance renewable energy reveal

improved awareness throughout the sector. These actions were also promoted through Mirova’s

advocacy actions and dialogue with policy makers and industry associations.

Additionally, business ethics scandals continued to surface this year, particularly for institutions

significantly exposed to investment activities. This issue led us to insist on our questions on the

pertinence of compliance policies for issuers. These engagement approaches should continue in

2017.


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Health

Issues

Companies in the health care sector are categorised in two sub-sectors: medical products and

medical services. Medical product companies include those manufacturing, producing, and

selling medicines as well as those involved in medical research. Medical service companies are

involved in the provision of health care services including private elderly care and health care

equipment manufacturers.

These companies face sustainability risks stemming from manufacturing safety to business

ethics, which includes marketing practices, pricing policies, and anti-corruption policies.

However, the sector also presents significant sustainability opportunities due to technological

innovation and the opportunity to tackle large underserved population groups through ad-hoc

access to medicine strategies.


In 2017, we engaged with pharmaceutical companies on broad sustainability issues affecting

the sector such as “access to medicine” strategies and transparent pricing, and we continued

our engagement with companies in both the medical products and medical services sectors on

manufacturing safety.

Transparent pricing has become a significant issue of concern for stakeholders in the

pharmaceutical sector as companies are increasingly pointed by regulators for providing

medicines that present high costs for the public health system. Raising controversies around

double-digit increases in drug prices, especially in the United States where recent health reforms

aimed at cutting back the wider public health coverage assured by the Obamacare, have

prompted some pharmaceutical companies to improve disclosure around their pricing policies.

However, most companies do not display good levels of disclosure around such policies.

Therefore, we continued our engagement in view of improving disclosure on relations with drug


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pricing policies and develop responsible pricing policies aimed at supporting access to medicines

among diverse consumer groups.

Finally, medical device manufacturers continue to be exposed to the risk of product safety

coupled with unethical marketing practices. Thus, we continued to engage on improving

transparency around best-practices around marketing practices and business ethics, as well as

around quality and safety procedures in product manufacturing.

Engagement in Action: Sanofi

We engaged with Sanofi as part of an investor roundtable on a few key issues for the company,

namely their access to medicine strategy, their transparency around pricing policies and their

strategy around product innovation.

We met with the company’ senior representatives on two occasions together with other

stakeholders and exchanged around our responsible investor point of view. During these

meetings, we had fruitful exchanges around the company’s practices around its global

sustainability strategy and future development plans. We were glad to notice the company’s

efforts towards ensuring the stakeholders’ buy-in of its sustainability strategy, and how

significant issues such as access to medicine, pricing and innovation were high on Sanofi’s

agenda. While we appreciated the company’s three-tailed approach around its ATM strategy

focusing on sleepiness sickness, malaria and neglected diseases in developing countries, we

recommended that the company also increased its focus on low-income populations using a

long-term view, and that it makes higher use of quantitative indicators to map a strategy and

monitor progress over time. In addition, while we praised Sanofi’s willingness to improve pricing

transparency, we also suggested to invest in innovation to legitimate price increases. Finally,

we also engaged the company on marketing practices and, more specifically, in relation to the

controversy related to its dengue vaccine in the Philippines; while we were reassured by Sanofi

that it had implemented WHO recommended practices, we noted that these practices are not

very conservative as further studies revealed secondary effects after the first vaccines had been

introduced in the country. We acknowledge that the field of vaccines is a perilous one, especially

when it comes to new vaccines, and that the entire industry needs to adopt more stringent

approaches when it comes to approval and dissemination of medicines, and we encouraged the

company to take the necessary steps in this direction going forward.

The company was receptive of our suggestions and reported that it would use them to refine its

sustainability approach. Regarding its marketing practices, Sanofi is firm on its position that it

followed WHO guidelines and thus we will need further dialogue to push for specific changes.

Mirova, therefore, is looking forward to reading Sanofi’s new sustainability report, following the

progress of the company in achieving these objectives and using it as a tool to further push

Sanofi’ sustainability practices. In 2018, we will focus our engagement with the company around

its marketing practices, especially in relation to the vaccines that often target consumers in

developing countries, and we will press for better practices and improved transparency.



Information & Communications Technology (ICT)

Issues

The ICT sector has greatly enhanced its reporting practices on sustainability topics, and many

companies now communicate well. While less exposed companies (typically B2B companies, tier

2/3 suppliers, etc.) and companies from countries with no regulatory framework on the topic

continue to poorly communicate on ESG issues, most of companies with which we engage have

been publishing ad hoc reports for several years.


New technologies are key to many sustainability solutions with great potential (e.g. intelligent

resource management and renewable energy deployment). However positive impacts may be

difficult to materialize particularly in the services industry. We engage with companies to better

illustrate their exposure to such solutions and to quantify their benefits by providing indicators

such as: 1) the breakdown of revenues by end-market and/or end-use and 2) the quantification

of positive impacts through indicators (e.g. number of users of mobile financial services in

emerging countries). This is particularly important for companies whereby their sustainability

solutions have positive impacts on their clients’ externalities. We also strongly encourage

companies to develop and reinforce their line of products and services in this area. Many

companies still cater to a wide variety of end-markets and, thus, are yet be considered as

significantly exposed to sustainability opportunities.

The extra-financial risk profile of ICT companies varies depend on the sub-sector. For services-

related companies, key discussion points focus on two main topics. First is data privacy which

covers issues on cybersecurity and the degree to which users have control on how their data is

used. Second is the responsibility of their platform and content which include issues such as

harmful/inappropriate content and behaviours, neutral access to information, the propagation

of fake news, and the risk of psychological dependency.

For electronic hardware companies, the main topic of focus is the responsibility of their value

chain (both upstream manufacturing processes and downstream suppliers in charge of

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electronic waste) and how the related social and environmental risks are mitigated. We engage

with companies to be transparent on the scope and quality of audit (e.g. share of procurement

covered by audits, audit processes & tools), audit results (by topic and severity) and subsequent

decisions (e.g. corrective measures, termination of contract). For issues such as conflict

minerals, e-waste or rare-earth, we highlight the need for specific processes such as using

certifications and joining industry-wide initiatives. Recommendations are also made in favour of

reducing the environmental footprint of electronic devices and infrastructures through the

optimisation of data storage and procurement of renewable energy, as the industry’s carbon

footprint has the fastest growth but remains small overall. We also engage on the issue of

planned obsolescence and the evolution of electronic devices’ energy efficiency.

Finally, our dialogue with ICT companies always integrate elements of discussions related to

business ethics and sustainable governance particularly on abuses of dominant position and

aggressive tax optimisation and the feasibility of disclosing a country-by-country tax report.

Engagement in Action: SAP

In 2017, Mirova had the occasion of extensively discussing the following topics with the

company: 1) products that provide solutions to sustainability issues, 2) group human resources

(HR) management and restructuring practices and 3) governance of sustainability.

On products that provide solutions to sustainability issues, the on-going technological shift in

the industry is creating demand and a market for sustainability solutions. A review of SAP’s

services that generate positive environmental/social impacts was done. Consequently, one of

the topics discussed was on how the company can better illustrate their exposure to these

solutions. The company has expressed that providing a breakdown per services or end-market

would not be sufficient and therefore talked more about their efforts to materialize the positive

impacts enabled by its services at clients’ level. Mirova then suggested the type of qualitative

and quantitative information that would be most useful in assessing the company’s exposure to

sustainability opportunities.

An in-depth conversation was also held on the company’s HR and restructuring practices. On

HR management, we notably gained knowledge on measures implemented to guarantee fair

working conditions to all SAP employees across the global, irrespective of discrepancies in local

regulatory framework. Also discussed were the various measures deployed to limit negative

social impacts during the restructurings that are quite frequent due to technologic shifts in the

industry. SAP’s responses to these issues appeared quite thorough and robust.

Our dialogue on the governance of sustainability was similarly insightful as SAP took the time

to describe the various levels where sustainability is being integrated in SAP’s governance as

well as the interactions between people responsible for this topic. Our main feedback was that

SAP’s approach seems advanced but would benefit on being formalized, so that stakeholders

would have a better understanding of the actual governance of sustainability structure in place

within the company.

Overall, SAP was open to the discussion and willing to continuously improve its approach to

sustainability. We look forward to maintaining such a constructive dialogue in the years to come.



Mobility

Issues

Mobility is a crucial aspect of human development. Moving goods and people facilitates access

to goods and services, particularly housing, work, health care, education and culture. However,

these displacements have impacts on climate change, air quality, consumption of fossil

resources, biodiversity and the health of populations. Today, mobility is still a privilege unequally

distributed amongst populations. The transport growth projections plan to double the number

of air passengers by 2040 and to reach nearly 2 billion vehicles in circulation in 2050. The sector

must reconcile access to mobility for the greatest number of people while reducing the

environmental and social impacts related to transport.

Companies can contribute to sustainable development issues through solutions related to:

• Ecological transition of transport, either for climate or pollution issues;

• Access to ecological mobility


Mirova encouraged companies to reinforce their positioning on ecological transition solutions

(goals, means implemented, challenges to overcome) and increase transparency on

investments and revenue related to these solutions.

In terms of risks, Mirova supported companies to better handle sustainability risks that are

strong in the sector:

- Global environmental impacts,

- Safety of transport, considering for example that road traffic is the main cause of death

among those aged 15–29 years,

2

2

5

6

8

13

15

6

8

17

Human rights

Pollution

Resources scarcity

Health & Safety

SupplyChain

Climate change

Employee Relations


Job creation





http://www.mirova.com/fr-FR/recherche-mirova/Thematiques-d-investissement-durable/Mobilite-durable



- Human capital management, as the industry is strongly dependent on the economy and

carried by the strong growth in emerging countries, it faces a double challenge of

adapting to the increased demand and maintaining respect of labour laws throughout

the production chain, especially in countries where social practices are less regulated,

- Responsible sourcing and conception, especially with the rise of electric vehicles that

causes new concerns regarding material supply chain and recycling.

Finally, companies active on defence sector, must ensure that military products are neither

exported nor re-exported to non-democratic countries or those where democratic practices are

judged to be insufficient.

Engagement in Action: Tesla

The development of electric vehicles also brings new challenges to responsible sourcing. For

instance, lithium-ion batteries require cobalt for cathodes. Nearly half of the cobalt reserves are

found in the Democratic Republic of Congo (DRC). The cobalt supply-chain in the DRC poses

problems of violations of the conventions of the International Labour Organization (ILO) and

supports the armed conflicts in the country. These issues, already at the heart of the concerns

of the automotive industry, could ultimately have strong financial consequences for companies

heavily invested in supporting lithium-ion technology. The Electronic Industry Citizenship

Coalition (EICC) launched a workshop focused on cobalt supply-chain from Congo in 2017 to

improve practices in ICT and automotive sectors.

We encourage car makers to be fully transparent regarding policies and actions deployed to

mitigate risks related. This issue was discussed with Tesla in 2017. Tesla has a very limited

sustainability policy. We nevertheless urged the Group on the importance of sourcing issues for

a pure player in electric vehicles.

In 2017, Tesla published a report on its strategy to avoid conflict minerals, with a discussion on

the complexity of doing this for a company with such a vast supply chain. The report focused

on the 3TG: tantalum, tungsten and gold, and underlines more globally the measures taken by

Tesla, namely: 1/ Working in close cooperation with battery suppliers to identify and start a

dialogue with commodity suppliers; 2/ Demand certification of the origin of raw materials, as

well as these suppliers' risk reduction policies; 3/ Where possible, visit production sites to

observe, evaluate and discuss risks, 4/ Verify independent audits to ensure that suppliers

comply with the applicable laws. The Group sources its cobalt only from South and North

America to avoid DRC concerns. Tesla also reduces quantity of cobalt in batteries for economic

and supply chain arguments. To go beyond and have a comprehensive policy including all

minerals issues, we encouraged the Group to follow initiatives launched by EICC.

Tesla seems committed to only sourcing responsibly produced materials and capable of listening

to investors’ and customers’ expectations.



Resources

Issues

The resources thematic universe is widely diversified, including industries such as mining

and metals, chemistry, agricultural chemistry, forestry, water utilities, and waste management.

Key risks are thus specific to each sector. Typically, mining companies are highly exposed to

critical social (human rights) and environmental risks associated with their activities. The

agricultural chemistry industry must primarily deal with the issue of product toxicity, both for

the environment (ecosystem degradation) and human health in the face of regulations often

deemed insufficient and frequent controversies. Product toxicity is also an important issue in

the general chemical industry. This industry must demonstrate an overall desire to reduce its

use of dangerous substances. The forestry industries (forest products, paper products,

packaging) have an important responsibility in terms of their supply chains and must be able to

demonstrate responsible management of forest ecosystems. Finally, the sectors in this universe

are highly industrialised, making health and safety an important issue for all.

These sectors are also well positioned to develop products and services that fill sustainable

development needs. In particular, players in water and waste treatment (providing sustainable

solutions to access to water and sanitary services, optimising natural resource management,

particularly via the circular economy), chemistry companies (providing products for the

development of sustainable industries, such as renewable energies, developing solutions that

optimise the environmental impact of client industries, etc.), and the forestry industry (reducing

the pressure on natural resources by developing recycled products, etc.) can contribute.


As in 2016, the main issue for engagement in 2017 remains to be the management of health

and safety risks – a major inter-industry issue. Although most industries have a history of risk

management for employee safety or environmental accidents, as required by regulations or

1

3

3

4

5

7

10

11

12

15

18

Consumer Protection

Human rights

Pollution

Resources scarcity

Climate change

Employee Relations

SupplyChain

Health & Safety

Job creation






http://www.mirova.com/fr-FR/recherche-mirova/Thematiques-d-investissement-durable/Ressources-durables



prompted by the potentially tangible financial impacts of these operational risks, there is still a

lot of work to be done, especially for their subcontractors). Health and safety also includes

product toxicity, which remains critical. The agricultural chemistry industry often fails to provide

sufficient responses in this area. On the other hand, the environmental impacts of industrial

processes are generally well managed. These industrial sectors have been long called upon to

manage pollution, and environmental optimisation often goes hand in hand with cost

optimisation (primarily by reducing energy consumption).

In terms of opportunities, sustainable solutions developed by these companies were often the

subject of exchanges and engagement as these sectors have many opportunities to develop

interesting products. There is nevertheless a lack of transparency on related sales revenue and

more robust methodologies for evaluating the environmental or social benefits need to be

established.

Engagement in Action: GEA Group

GEA Group’s role as a global equipment and process technology provider for the food industry

and other industries makes it exposed to providing solutions to sustainable development issues

in the industries that they serve. However, the company does not have any quantitative

estimates on the percentage of sales that these solutions represent nor on the positive impacts

that these solutions could provide. Additionally, the company’s level of disclosure regarding ESG

risk management has been lagging behind their peers in the industry for years. As such, these

have been the main topics of discussion with the company.

In 2017, Mirova noted positive changes. The company’s ESG disclosure improved; the ESG

section of its annual report is now longer, with more comprehensive content by important topic,

and the company made the effort to include a few quantitative indicators to illustrate its

performance. Furthermore, there have been evolutions in the organization within the company

to manage ESG topics, from Group-level to operational level: the head of quality and HSE

manages a team of more than 6 people, and there is a clear responsibility established for HSE

for every business function (“Production”, “Projects”, “Service”), as well as for every regional

branch (North America, Latin America, Western Europe and Middle-East/Asia, etc.). This

sustainability organization is more formalized than it used to be, allowing the topics to be more

thoroughly managed across the company and better integrated into business and operations.

Mirova openly welcomes these improvements and looks forward to seeing the company progress

further with regards to transparency. Mirova will also continue discussing with GEA Group on

how to best communicate on the sustainable benefits of their products.



1.2 Influence via Exercise of Voting Rights

Voting at the general shareholder meeting is a responsibility of all institutional investors

like Mirova. The voting rights policy is designed to formalise the principles according to

which voting rights are exercised. In order to foster value creation for its clients, Mirova

aligned its voting rights policy with its investment strategy. This required defining the principles of

good governance to which Mirova adheres up front. In order to ensure that environmental and

social issues are better considered, power must be evenly distributed between stakeholders, which

makes a case for a partner-based vision of company governance. Defining shareholder

prerogatives and placing responsibility for making decisions with long-term stakes back with the

Board are key reflections to be had as part of this process.

Accordingly, Mirova began an in-depth, critical reflection in 2015 on the stakes of traditional

governance, seeking to define a model based on an entrepreneurial and sustainable vision of the

company. This reflection laid the groundwork for a new voting rights policy firmly based on a new

governance model based on 4 major foci:

Development of long-term shareholding to support sustainable development in the company

Establishment of a Board that integrates all stakeholders in a balanced way, taking CSR

issues into account when developing company strategy

Fair and balanced distribution of value between stakeholders while including environmental

and social issues in incentive and interest alignment programmes

Transparency and quality of financial and extra-financial information, including creation

of a report that considers sustainable development issues.

The effective implementation of this policy by the companies we invest in and, more broadly, the

diffusion of these good practices will be a long process given the pervasiveness of the shareholder

governance model. In parallel, Mirova decided to employ an in-depth engagement strategy based

on these issues to encourage companies to progressively take them into account. This strategy

has various modes of application: direct dialogue, collaborative engagement, and targeted

advocacy.

Mirova is also convinced of the need to create a theoretical framework for developing new models

of governance, which include environmental and social issues. Mirova has therefore decided to

support academic research, joining the Mines ParisTech Chair Théorie de l’entreprise. Modèles de

gouvernance et création collective (Theory of companies. Models of governance and collaborative

creation) in 2015. This strategic co-operation will be crucial for developing new ways of thinking

about developing viable, value-creating companies for all stakeholders.



2017 Voting Results

For

64%

Against

25%

Abstention

11%

Total Votes

For64%

Against

25%

Abstention11%

Europe

For

67%

Against24%

Abstention9%

Americas

For

66%

Against29%

Abstention

5%

Asia For

50%

Against50% Oceania



Resolutions Opposed by Subject

This rate varies considerably by region and subject. The opposition rate in Europe (36%) was

slightly higher than that of America and Asia (33% and 34%), which can be explained by the fact

that European companies proposed a wider range of subjects for shareholder voting. For example,

Europe represented 78% of resolutions in the Distribution of Value theme and 87% of resolutions

in the Transparency of Information theme, two subjects that face high opposition rates in

accordance with the focus of our voting policy.

The Distribution of Value category covers all resolutions concerning the remuneration of the various

stakeholders that contribute to value creation within in a company: shareholders (dividends),

employees (savings plans), and executives (compensation structures). This category also includes

the remuneration paid to directors insofar as their wages can impact the good exercise of their

responsibilities in the wider interest of the company and all its stakeholders.

In terms of dividends and in accordance with our voting policy, Mirova generally questions the

legitimacy of a specific stakeholder having a say in the remuneration of another, and thus chooses

to abstain from resolutions on these principles of remuneration defined ex ante.

For resolutions on remuneration mechanisms and their implementation (remuneration reports and

long-term initiative plans for management/employees), Mirova opposes those that do not include

environmental and social performance criteria.

‘’36% - the average opposition rate (votes

against & abstentions) for 2017 vs. 30% in 2016



Governance: Transversal Issues

Governance issues remain relatively similar across sectors. In line with previous years, Mirova

chose to highlight the following issues for each theme in 2017:

Responsibility and Representativeness in Governance

✓ The Nomination Committee is responsible for selecting applicants. Mirova expects specific

explanations of these choices.

✓ Balanced representation of the company’s strategic stakeholders on the Board: Mirova

maintains that employee representatives should be present on the Board, even in markets

with regulations that favour employees.

Fair Remuneration among Stakeholders

✓ Aligning stakeholder remuneration with real value creation: aligning stakeholders’ long-term

interests with those of the company should result in a positive correlation between shareholder

remuneration (dividends and share repurchases), manager remuneration (total), that of

employees (payroll), and that of the company, for example via taxation.

✓ Balancing remuneration in the company: stakeholders can only collaborate efficiently if the

degree to which they contribute is recognised and compensated. For Mirova, companies need

to consider the distribution and remuneration mechanisms that confirm to this principle of

equity. We encourage companies to integrate employee representatives into compensation

committees and to reveal changes in payroll particularly in manager remuneration.

Taking Environmental and Social Issues into Account in Governance

✓ Integration of environmental and social issues into remuneration policies: through dialogue

with the companies held in its portfolios, Mirova seeks to understand how the CSR strategy is

implemented in remuneration mechanisms, evaluate the pertinence of criteria used

considering issues faced by the company, and regulate their monitoring.

✓ Taking CSR issues into account on the Board: we encourage companies to create a CSR

Committee on the Board, or any other equivalent structure dedicated to these issues.

✓ Verification and certification of extra-financial information: Mirova wants to see audited and

certified information on environmental and social performance included in the annual report.

40

42

71

96

110

150

Business Ethics

Integration of all Stakeholders at Board Level

Pay Equity

Sustainability Reporting & Transparency

Sustainability Committee

Sustainability Criteria in Remuneration




1.3 Improving Green and Social Bond Issuance Practices

Mirova’s engagement approach for green and social bonds (sustainability

bonds) is based on the conviction that taking extra-financial criteria into account in investment

processes is essential for long-term value creation. Therefore, Mirova through investing in

sustainability bonds aims to select entities or projects that allow us to capitalise on opportunities

created by the transition of our economy towards a more sustainable society while ensuring that

environmental, social, and governance (ESG) criteria are considered.

However, the sustainability bond market is still nascent and its practices are varied, particularly in

terms of transparency. Throughout the year, we continued the dialogue initiated in 2014 with

current and potential issuers of this type of bond. We sought to inform them of our expectations

and promote the establishment of a sustainability bond market that is structured and credible.

Growth of the green bond market in 2017 was primarily due to the inaugural issuance of the French

Treasury, issuances from new issuers in developing markets and issuances by repeat issuers with

already existing green bond frameworks. For new issuers from developing markets, engagements

centred on the four main themes outlined below, with a strong emphasis on the quality of reporting

and mitigations of ESG risks. With repeat issuers, focus was on how their green bond annual report

can provide investors with useful information on the projects financed and their outcomes and

impacts such as impact and output indicators and their methodologies (e.g. emissions induced,

emission avoided, etc.), and information on the mitigation ESG risks related to the project.

Additionally, Mirova participated in several conferences and meetings designed to engage in

dialogue with issuers that haven’t yet issued green or social bonds and encourage them to do so.

While undertaking these actions, Mirova systematically encouraged improvement in transparency

and practices. Its RI research team was thus able to deepen its understanding of these markets.

Our engagement approach for green and social bond issuers is based on four main themes:

6

15

21

4

18

13

8

37

Issuance of a Green Bond

Use of Proceeds

Project Selection Criteria

Second Opinion

Mitigation of ESG Risks

Third Opinion

Governance of the Bond

Reporting & Impact Indicators

Number of Engagements per Topic

Use of proceeds

Mitigation of ESG risks

Impact measurement

Quality of reporting



Primary Engagement Themes for Sustainability Bond Issuers

Use of funds - We recommend that issuers clearly mark on the prospectus that the proceeds

of the bond issuance will be used to finance projects that create an added environmental or

social value. We strongly emphasise the need for clarity and quality in these principles of

allocation of funds. The project selection criteria need to be clear and sufficiently restrictive to

ensure that the projects financed will have positive environmental and/or social effects.

Reduction of ESG risks - We encourage issuers of sustainability bonds to communicate the

ESG risk reduction strategies associated with the project being financed. This is particularly

important for projects that could have potential negative consequences if the environmental

and/or social risks are not well managed.

Transparency and quality of reporting - We encourage issuers to be very transparent in

the traceability of funds raised by the issuance of sustainability bonds. To this end, we request

that reports detailing financed projects be published at least, annually. Having this information

audited by an external third party is highly encouraged.

Measuring impact - We encourage issuers to improve the way they measure environmental

and/or social impacts of projects. We further encourage that the methodology used to quantify

these impacts also be published to get a better understanding of the overall impacts.

Beyond its individual engagement initiatives, Mirova actively participates in the Green Bond

Principles (ICMA) (for more details, see pp.60).

Engagement in Action: Iberdrola

Iberdrola has a long history of being transparent and proactive regarding its sustainability

practices. It is a utility with a relatively low carbon footprint, detailed disclosure on key

indicators, and a demonstrated focus on increasing the share of renewable energy in its

generation mix.

While the company has issued several Green Bonds in the past, we became concerned in

January 2017 because the prospectus under which Iberdrola issues Green Bonds changed its

wording to indicate that proceeds for the issue of any bond under the prospectus could be used

either for general corporate purposes or to finance/refinance Eligible Green Projects. The

company itself did not issue any documentation to signal whether an issuance was intended to

be a Green Bond or not (except for a second opinion obtained from a third-party provider),

meaning that it was unclear if all proceeds from Green Bonds would go to Eligible Green Projects

or if some could go to general corporate purposes. In the latter case, we would not consider the

issuance a Green Bond.

We, thus, engaged with the company who confirmed that the second opinion was the only

document which indicated whether an issuance is a Green Bond. We encouraged the company

‘’48 bond issuers targeted



issues documents to explicitly state that all proceeds will go to green projects for Green Bonds,

and re-emphasized our preference for information originating from the issuer itself.

The company was understanding and responsive, suggesting that they would consider

publishing an audited framework to describe their commitments and procedures regarding all

the company’s green financing. Then, in September 2017, Iberdrola changed the wording of its

prospectus and the title of its notes to make it clear whether or not each issuance is a Green

Bond. Furthermore, in February 2018, the company indeed published its Framework for Green

Financing, which clearly describes the use of proceeds for notes issued and identified as Green.

Overall, our engagement was successful in obtaining clarification as to the use of proceeds for

bonds issued by the company. This further reinstated the eligibility of Iberdrola’s Green Bonds

for investment.



1.4 Responsible Infrastructure

Mirova endeavours to prioritise projects that capitalise on opportunities created by the

economic transition towards a more sustainable society while ensuring that

environmental and social risks are managed. Our research is conducted in two phases:

Evaluation of project’s adequacy to attain relevant Sustainable Development Goals1

Evaluation of environmental and social risks inherent to the project’s life cycle.

Mirova’s engagement approach for infrastructure projects is based on the conviction that financing

renewable energy infrastructure and public-private partnerships are efficient and concrete means

to address sustainability issues in the real economy. However, to highlight the environmental or

social benefits of a project for investors, Mirova needs concrete figures: long-term job creation for

each project, CO2 emissions avoided for renewable energy projects, percentage of energy

consumption reduced for energy efficiency projects, number of kilometres of additional lines for

rail projects, etc. This practice of considering environmental and social criteria in the infrastructure

asset class is still in its nascent stages. To encourage this approach, we engage with project

leaders.

Integration of these issues into investment decisions for infrastructure projects is based on several

factors:

Seeking out tools to finance the energy and societal transition, which requires targeting

projects with high social and/or environmental value-added impacts

Supporting public entities as they progressively integrate sustainable development criteria

into calls for tender

Increasing responsible investment’s impact with vehicles that facilitate improvement of

traceability between the funds and the environmental and social benefits created.

In 2017, Mirova continued to employ its infrastructure fund analysis method using the following

engagement process:

Given the recent emergence of these issues, we have identified lines of improvement for all projects

in terms of transparency and performance evaluation. The amount of information provided can be

deficient for some indicators. As a responsible investor, we wish to motivate our partners to

increase the amount of information collected as well as the level of transparency of these

indicators.

This approach is employed both directly with project heads and in shared initiatives with other

investors.

1 http://www.un.org/sustainabledevelopment/fr/

Identification of

opportunities

Transaction analysis and investment selection

Investment monitoring

Exit

First sustainability analysis Engagement with project companies

Target Validate the sustainability value of the project before making the investment decision

Target Improve sustainability practices relative to the project through continuous dialogue

http://www.un.org/sustainabledevelopment/fr/

http://www.mirova.com/fr-FR/investissement-energie-renouvelable



Direct Engagement with Project Heads

When we analyse projects, key topics for engagement are systematically defined. Once the

investment is made, Mirova and those responsible for the project discuss these foci to collaborate

on improving the project. Additionally, when a project is evaluated in a committee, a request for

transparency accompanies the project’s analysis. This request, tailored to each project, is

transmitted to the involved companies so they can improve their collection and diffusion of

environmental and social information.

Financial Centre Engagement

To further reinforce our engagement approach, we collaborate with two initiatives.

The first is the GRESB Infrastructure platform. Mirova is a founding member of the initiative,

hosted by the GRESB2, along with AIMCo, ATP, AMP Capital, Aviva Investors, APG Asset

Management, CalPERS, the Ontario Teachers’ Pension Plan, PensionDanmark, and PGGM

Investments. GRESB Infrastructure seeks to provide a systematic evaluation of ESG aspects, an

objective score, and a comparative analysis with projects of the same kind. This will provide

institutional investors with a standard report for their investments. This project began in 2014 and

came to fruition in 2016 as the platform was officially launched. The first round of information was

collected from companies this same year3.

The second is the creation of a standard/certification label for infrastructure projects that rate their

environmental, social, and governance qualities. This is run by GIB (Global Infrastructure

Basel), a Swiss foundation dedicated to promoting sustainable and resilient infrastructure. Mirova

is on the Board and Natixis is Secretary of this initiative.

Being involved in these initiatives gives us momentum as we move towards better ESG information

in infrastructure projects.

Engagement in Action: GRESB

Based on our experience in 2016, we provided feedback to the initiative on the questionnaire,

to adapt the latter in terms of understandability, ease of use and size. We were also active in

GRESB’s second campaign, collecting information from our partners. In this second round, we

chose to focus on 15 projects already in operation. The GRESB questionnaire covers many

questions including: project characteristics, management and incorporation of environmental

and social issues in strategic long-term plans, policies, diffusion and external verification of

data, impact, evaluation of risks and opportunities, implementation and monitoring. While the

quality of this questionnaire is appreciated, the project companies we enrolled in GRESB had

encountered difficulties in 2016 due to its complexity and length. This year, it was much easier

for some project companies, but our active involvement remained necessary in multiple cases,

most of the time to understand which type of data / document would be most relevant to

provide.

Much like last year, this second campaign was time-consuming but insightful. We had the

opportunity to explain in detail which sustainability topics we considered as most relevant for

each type of project and, subsequently, which type of qualitative information and quantitative

data are most precious to fully grasp the sustainability practices implemented on a given project.

2 GRESB: Global Real Estate Sustainability Benchmark (https://www.gresb.com/about) 3 More information is available at: https://www.gresb.com/infra/members.

https://www.gresb.com/about

https://www.gresb.com/infra/members



2. COLLABORATIVE

ENGAGEMENT

INITIATIVES

Summary and Key

Figures (p.37)

2.1 Collaborative

Engagement Strategy

(p.38)

2.2 Mirova’s

Collaborative

Engagement Platform

(p.40)

2.3 Other Collaborative

Engagements Initiatives

(p.47)

2.4 PRI Engagement

Platform Initiatives

(p.52)



Collaborative Engagement Initiatives


Collaborative engagement consists of identifying controversial practices within an industry or group of companies and engaging in a dialogue to request increased transparency, and if needed a change in practices. In order to strengthen the influence of responsible investors, engagement is undertaken in collaboration with others. The goal is then to obtain specific and measurable changes from issuers within a determined timeframe. In addition, supplementary engagement can be conducted to influence industry associations and/or public policies

MIROVA’S ENGAGEMENT PLATFORM

In 2014 Mirova launched its own collaborative engagement platform, piloted by its own

RI experts and representatives of Mirova’s clients, to promote sector-wide initiatives.

Arctic oil exploration:

▪ Initiated in 2014 to encourage increased operational transparency

▪ In 2017, following the launch of the investor statement in 2016, Mirova continued its

discussions with different players towards promoting the Arctic moratorium.

Supply chains:

˗ Textile sector:

▪ Initiated in 2014 to encourage companies to espouse higher levels of transparency in their

supply chain management

▪ In 2017, new member of the Sustainable Apparel Coalition (SAC), Mirova and the SAC

hosted an investor workshop on transparency in the textile supply chain to further align

investor expectations in the area.

˗ IT Sector:

▪ Also initiated in 2014, Mirova and its partners sought to encourage IT companies to adopt

practices to ensure better sustainability in their supply chains

▪ In 2017, Mirova shared the platform’s work in a conference co-organized by the Electronic

Industry Citizenship Coalition (EICC), now called Responsible Business Alliance (RBA) on

the sourcing of raw materials.

15 OTHER COLLABORATIVE ENGAGEMENT INITIATIVES IN WHICH MIROVA TOOK

PART

Access to Medicine Index

Access to Nutrition Index

Antibiotics Overuse in Livestock

Climate Action 100+

Child Labour in Cocoa Supply Chains

RE 100

Sustainable Protein

Investor Statement on the following

initiatives:

Bangladesh textile industry

World No Tobacco Day

Responsible antibiotics stewardship

LGBT Rights in the USA

Workforce Disclosure Initiative

Participation in PRI-coordinated initiatives: Human Rights in the Extractives, Corporate tax

responsibility, Deforestation in cattle supply chain



2.1 Collaborative Engagement Strategy

Goals of Collaborative Engagement

The goal of strengthening and maintaining investment opportunities as part of a responsible /

sustainable investment strategy implies establishing collaborative engagement to improve

environmental and social practices at the industry level or for a large number of companies.

Collaborative engagement, if it is successful, is also designed to develop industry practices

compatible with responsible investment to:

Make companies eligible for investment that were until now excluded from Mirova’s

sustainable investment universe and/or that of its clients due to poor environmental and/or

social practices

Improve transparency practices of companies within the investment universe for

controversial subjects, so that they remain eligible for investment.

Depending on the situation, Mirova can thus engage collaboratively to obtain:

- increased transparency from targeted companies when we need to better understand

the issues related to controversial production processes and/or products in terms of their

negative environmental and social impacts

o example: first exchanges with companies in the oil sector to understand issues

associated with off-shore drilling in the Arctic

- increased transparency and improved practices from targeted companies when the

stakes and negative impacts of a product and/or process are well understood

o example: collaborative engagement conducted to improve practices of companies in

the textile and IT industries with regard to supply chains

Drivers of Collaborative Engagement

Issue is product related

No investment &no engagement:Would require a complete change of business modele.g. tobacco, coal

Potential Investment BarrierInvestment Barrier

Issue is related to product mix and /or

processes

No investment & engagement to improve product mix and practices for a more positive E/S impacte.g. oil and gas, metals and mining, shale gas, defence

Issue concerns limited transparency

(little information reported on the issue with E/S impacts

difficult to measure)

Issue concernsE/S impacts

(E/S impacts are verified, measurable and material)

Engagement to increasetransparency and enhance stakeholder knowledge regarding the issuee.g. all sectors- nomination, pay ratio

Engagement toimprove transparencyand practices surrounding this issuee.g. textile & ICT – supply chain



- improved environmental and social impacts of the products and services offered by

targeted companies.

o example: collaborative engagement with the financial sector, pushing for more

investment and financial products dedicated to the energy and ecological transition

Mirova’s Collaborative Engagement: Methods & Scope

Mirova oversees or contributes to several collaborative engagement procedures.

• Mirova’s Collaborative Engagement Platform

In 2014, Mirova launched its own collaborative engagement platform, comprised of experts

from Mirova’s research team and representatives of its clients or investors interested in

collaborative engagement. The platform therefore benefits from the expertise of Mirova’s RI

research team and the influence of institutional investors. Mirova launches engagement initiatives

via this platform. These initiatives are those for which Mirova and its clients are leaders, pertaining

to specific issues that require more engagement from investors.

Engagement is conducted in phases until tangible results are obtained and can be monitored over

time. Issuers are approached first. Then if it is deemed necessary, the process is expanded to the

organisational or political level.

• Other Collaborative Initiatives

Other investors also lead collaborate engagement initiatives. When the subject of engagement is

coherent with Mirova’s strategy and identified priorities, Mirova signs the engagement letters and

open declarations written by other investors, either by directly soliciting them or via the PRI

engagement platform.

• PRI Steering Committees

Finally, Mirova is a member of the PRI investor working groups with the goal of improving industry-

wide practices.



2.2 Mirova’s Engagement Platform

Social Risks in the Supply Chain

Launch date:

June 2014

ESG Themes:

Social impacts: working conditions and human rights

Sectors:

ICT and Textile

Type of engagement:

Collaborative

Social problems throughout the supply chain can present serious

risks for companies, as was the case for Apple when working

conditions at Foxconn were revealed or for the entire clothing

industry after the Rana Plaza building collapsed in Bangladesh. In

the wake of these events (suicides at Foxconn in 2010, Rana Plaza

collapse in 2013), it became clear that despite efforts to improve the

situation, such as fighting against poor working conditions and

human rights violations, social problems were recurring in these

industries. These problems are present not only in countries directly

affected by controversies, but also in those with similar

characteristics. In addition, these events highlighted the urgent need

for immediate and continued action by governments, civil society,

and the companies themselves.

We therefore decided to launch an engagement initiative targeting

big textile and ICT manufacturers whose products are directly sold

to the public, with the goal of improving supply chains in these

sectors.

Launched in 2014, the engagement aims to work with the textile and ICT industries to move

towards a more sustainable supply chain that respects human rights and provides its workers with

proper working conditions. After two years of discussions with companies, results have shown that

while the companies have in place the necessary mechanisms (audits, corrective action plans, etc.)

to encourage their suppliers to adopt more responsible practices, minor and major controversies

in the area continue to be unveiled, indicating the need for more effective measures that would

require the participation of all actors involved (industry, governments, and advocacy groups). The

role of the textile and ICT industries as such is to move coherently forward together if they are to

make a real impact on their supply chains. Accordingly, in 2016, meetings were held with industry-

wide initiatives: The Sustainable Apparel Coalition (for the textile industry) and the Electronic

Industry Citizenship Coalition (for the ICT industry). The goal was to see how investors can play a

proactive role in motivating the two industries to progress towards a more sustainable supply

chain.

In 2017, Mirova decided to be the first investor member of the Sustainable Apparel Coalition (SAC)

to take a more proactive approach on the information that companies can eventually share publicly

in 2020. With regards to our work with the Electronic Industry Citizenship Coalition, while progress

has been slow, Mirova has been able to communicate its transparency expectations from the sector

through the participation in different conferences.

2014

Launch of engagement

Beginning of discussions with

companies

2015

Continuous discussion with companies and

feedback sent to companies

2016

Contact with industry initiatives initiaited and discussion held

2017

Hosted an investor workshop on

transparency in the textile supply chain

with the SAC



Textile Industry

Following the decision in 2016 to focus on

engaging with industry initiatives in addition

to individual companies with regards to

making the global textile supply chain more

sustainable and responsible, Mirova joined

the Sustainable Apparel Coalition (SAC) in the

beginning of 2017. To further promote the

objectives of the engagement, Mirova joined

the Stakeholder Engagement Working Group

and the Brand Module Update Working Group.

Below is a description of the actions done in

the interest of the overall engagement goals:

• Brand Module Update: Communication

of Indicators

With the help of the investor platform, a list

of various social and environmental indicators

was created and sent to the people in charge

of the Brand Module update. The topics that

these indicators cover is purchasing practices,

traceability, respect of the freedom to

associate and collective bargaining and water

and environmental efficiency. These

indicators then contributed to the

development and the update of the questions

to be asked in the Brand Module.

• Brand Module Update: Consultation of

Questions

Once the first draft of questions was released

to members, Mirova commented on the

questions keeping in mind the objectives of

the initial engagement. Being one of many

other groups of stakeholders, it is unclear to

what extent these comments will be

considered in the final draft of questions.

Stakeholder Engagement: Investor

Workshop 11/2017

The culminating event of the work of Mirova

with the SAC in 2017 is the organization of an

investor workshop in Mirova’s offices

November 2017 to introduce to the investor

platform and other interested investors the

SAC and its transparency roadmap. The main

goal of this workshop was to get investors

familiar with the work of the SAC, how it can

benefit not only the investors’ engagement

with the sector but also the integration of

these factors into investment decisions and

increase investor support to encourage the

adoption of Higg in their invested companies’

supply chains. The other goal was to get

investors together to start the discussion on

how to better align investor expectations to

avoid investor questionnaire fatigue amongst

invested companies.

The event was rather successful as it was the

first of its kind. Participants were invited to

think about the social and environmental

issues the industry faces and see how a

transparency tool such as the Higg Index can

play a role in improving these issues.

Furthermore, it provided the investors with a

safe space to discuss the difficulties that we

currently face with regards to addressing and

measuring these issues amongst different

companies in the sector. The event concluded

with investors realizing the importance of

transparency in the industry and the need to

work together in using transparency as a tool

to improving social issues in the supply chain.

While engagement with the SAC was

important, it remains equally important that

the connection with companies is maintained

particularly to ensure that the Higg Index is

fully adopted by the textile companies.

Companies that are already part of the SAC

are further encouraged to integrate the use of

the Higg Index throughout their supply chain

management. For companies not yet part of

the SAC, Mirova is engaging with them to

consider membership and use of the Higg

Index as their primary tool.



ICT Sector

Considering our difficulties in linking dialogue

with certain companies, we decided in 2016

to adopt a new strategy. Rather than

contacting the company directly, we would try

to communicate our messages through our

participation to the Electronic Industry

Citizenship Coalition (EICC). We subsequently

wrote a letter to Rob Lederer (Executive

Director), on behalf of the platform, outlining

our engagement’s purpose.

Now named the Responsible Business Alliance

(RBA) to include companies outside the ICT

industry that are exposed to similar issues

(e.g. electric vehicles), this initiative

continues to set the standards and to develop

the tools supporting a responsible

management of supply chain throughout the

ICT value chain. The RBA counts over 110

members, among which Apple, Samsung

Electronics and Microsoft and, during 2017,

we have been active with it on multiple

occasions. Early in the year, we were invited

to speak during an investor session with the

initiative’s board members. On this occasion,

we detailed our views on supply chain

management, notably underlining the main

challenges we identify, the best practices we

are supporting and the impact an insufficient

management of supply chain may have on our

investment decisions. It was followed by a

very constructive dialogue with all members

present and some one-on-one discussions

with various companies afterwards. However

certain companies were still reluctant to

speak with us outside of their written

communications. This has confirmed that our

strategy to act via industry coalitions is the

most adequate.

In May, we participated to an event organized

conjointly by the EICC, the Conflict-Free

Sourcing Initiative, the World Economic

Forum and the OECD on the sourcing of raw

materials. On this occasion, we shared our

platforms’ actions with various participants

including companies, NGOs and other

investors. We were notably invited to

participate at an investors’ lunch meeting

where participants shared their opinion on

which supply chain issues should be mostly

focused on and which practices should be

supported. Later in the month, we supported

the decision of the EICC to extend its scope

and become the RBA. This is mostly since IT

equipment are increasingly present in other

industries’ products and services, thus

exposing companies outside the ICT sector to

the same supply chain management risks.

The RBA was officially launched in late

November at the U.N. Forum on Business and

Human Rights.

Mirova also held discussions with RBA on how

investor participation could increase. We

suggested the creation of an investor or

external stakeholder working group as

members of the RBA currently only consist of

companies. While RBA has noted the

suggestion, and thought it to fit their

objectives, no firm decision has been made.



Oil Exploration in the Arctic

Initiated in 2014, our initiative first focussed on engaging with companies on improving

transparency around operational risk management and the economic rationale of their involvement

in the Arctic. Successively, in 2015 we asked for precise commitments in relation to oil-spill

response management and risk sharing in joint venture partnerships for those projects entering a

final investment decision. We also provided companies with feedback based on our comparison of

the operational and environmental risk-management mechanisms put in place and their levels of

disclosure. In 2016, we decided to step up our engagement and reach out to policymakers to ask

for stronger protection in the area through an investor statement. After the release of the investor

statement, 2017 saw varied levels of engagement from part of the Arctic Council Member States.

Mirova also continued engaging with 5 of the original target companies and added 7 companies to

the list on publishing their list of licenses in the region.

Launch date:

June 2014

ESG Themes:

Direct environmental impacts

Sectors:

Oil and gas

Type of engagement:

Collaborative

Looking back at the history of offshore exploration, the Arctic seems

to be the final frontier for oil companies. However, the region still

presents many challenges, especially for offshore oil extraction,

where oil exploration has not yet started. As companies are moving

extraction to increasingly risky areas, the possibility of an oil leak in

the Arctic is impossible to predict quantitatively, and the

consequences would certainly be dramatic. At the same time,

regulatory constraints in the region are very high due to its extreme

sensitivity. These combined factors call into doubt the economic

feasibility of these projects. For investors, major questions remain

regarding the level of risk. In light of these considerations, Mirova

published a study in February 2014 highlighting the risks of offshore

oil exploration in the Arctic (Offshore Oil in the Arctic, should

investments be frozen?) and identified the oil and gas companies

most exposed to such risks. We have therefore decided to engage

with the oil and gas companies exposed to offshore Arctic exploration

– or with licences to explore in offshore Arctic waters - with the goal

of improving their disclosure concerning the economic impact and

sustainability management systems of their operations and to

reduce the environmental risks associated with their operations.

2014

Launch of engagement

Beginning of discussions with

companies

2015

Continuous discussion with companies and

feedback sent to companies

2016

Investor statement to Arctic Council and to targeted companies

2017

Discussions with different political actors to promote Arctic moratorium



Despite the volatility of oil prices and geopolitical tensions among Arctic region member countries,

we are convinced that rapidly changing drilling technologies and the presence of abundant

resources can rapidly switch the spotlight back to Arctic drilling. As responsible investors that have

been engaging on the issue of offshore hydrocarbon exploration in the Arctic since 2014, we note

that oil exploration in the region strongly contrasts with the climate commitments that countries,

including Arctic Council members, made during the Paris Climate Summit in December 2015.

Considering the efforts shown by the Arctic Council members to strengthen the protection of the

Arctic high seas through stronger regulation of commercial fishing, as well as the pledges made by

political leaders of some Arctic States to enhance protection of the region, we decided to step up

our engagement at the policy level.

The Investor Statement to the Arctic Council and Targeted Companies sent out in 2016 called upon

the Arctic Council member states for an unlimited moratorium on all hydrocarbon exploration

activities in the region and for broader involvement from other states that could carry out similar

activities in the region. This statement was backed by 23 international investors representing over

EUR 5 trillion in Assets Under Management (AUM). In addition to the moratorium, the statement

called upon Arctic states to consider national climate change mitigation commitments and related

greenhouse gas (GHG) emission reduction targets prior to renewing existing or granting any

additional exploration licenses across their Arctic territories. As there are a number of exploration

licences that have already been granted in the region, we also asked that stricter exploration

criteria to be uniformly applied throughout the sovereign territories of the Arctic with the facilitation

of the Arctic Economic Council, including informed consent of indigenous people and proof of

effective oil spill prevention and clean-up mechanisms and solid financial solvency of companies

submitting their exploration proposals. The statement was also addressed to the oil and gas

companies with whom we engaged since 2014 on the issue, asking more specifically that they

commit to avoid hydrocarbon exploration in areas across the broader Arctic region that have been

identified by the Arctic Council as bearing heightened ecological significance, and that they commit

to a de facto drilling moratorium in Arctic marine waters covered by ice due to current technological

uncertainty in terms of the effectiveness of oil recovery mechanisms.

Requests made in the investor statement:

For policymakers:

✓ High Sea Arctic Areas (North Pole): the creation of an unlimited moratorium for all

hydrocarbon exploration activities in the Arctic High Sea area,

✓ Sovereign Arctic: for Arctic states to consider national climate change mitigation commitments

prior to renewing existing or granting any additional exploration licences across their Arctic

territories; common framework across the region for increased protection of areas of heightened

ecological importance, independently from their legal status and based on a precautionary

approach,

✓ For outstanding existing licences: stricter, uniform operational standards for Arctic drilling

across the rest of the Arctic.

For targeted oil and gas companies:

✓ Disclose the number and location of the licences they hold in the Arctic with their expiry dates,

✓ Inform investors and other stakeholders of their intentions regarding the use and potential

extension of these licences.

✓ Commit to a de facto moratorium on offshore drilling in offshore icy waters of the Arctic region.

✓ Avoid all hydrocarbon exploration in the other regions of the Arctic where zones of heightened

ecological importance have been identified, independently of their legal status based on a

precautionary business approach.



Main developments with O&G companies

Seven companies were added to the original list of five companies. The same letter that was

originally sent in 2014 was sent to these additional seven companies. The statement was well

received by some where Total has agreed to publicly list its exploration licenses in the region with

a map, and renewed its pledge not to explore oil in offshore waters covered by ice. Another

company has also renewed its pledge to avoid the targeted areas and is currently looking to

increase transparency around its licenses in the region. Others provided limited responses

acknowledging the statement but having no intention of publicly listing the licenses held in the

Arctic. One company, however, went in direction opposition of the statement by accepting the first

federal permit granted in two years to drill oil exploration wells in U.S. Arctic waters. Engagement

will continue with this companies and the other companies that did not respond.

Main development at policy-makers’ level

2017 saw different levels of engagement from part of the Arctic Council Member States:

• Finland chairs the Arctic Council and has listed environmental protection as one of its 4

strategic priorities.

• Norwegian authorities, after opposition of NGOs and a change of government, reversed

their previous stance in January 2018, announcing that they do not intend to issue

hydrocarbon search and reconnaissance licenses in the next four years and will not allow

oil exploration or production in a protected area near the Lofoten Islands and the Vesterålen

Archipelago located above the Arctic Circle.

• Russia, on the contrary, has confirmed its ambition with several drilling operations started

in 2017 by state-controlled Rosneft and Gazprom, the only two companies allowed to drill

in the Arctic offshore under Russia’s legislation.

• Many non-Arctic countries have increasingly committed to a better protection of the area.

France, for instance, published its National Roadmap for the Arctic in 2016, outlining its

interest in increasing scientific cooperation in the region, as well as implementing a multi-

sector, precautionary environmental approach based on the conservation of Arctic marine

ecosystems (France Diplomatie, 2016).

Arctic Council

The Arctic Council is an international high-level intergovernmental forum that allows for co-

operation, coordination and interaction among Arctic States with the involvement of the Arctic

Indigenous peoples and other stakeholders qualifying as Observatory Members. A self-

regulatory body without the status of an international organisation, the Council is made up of

the 8 Arctic member states (United States, Canada, Finland, Greenland (Denmark), Iceland,

Norway, Russia, and Sweden) and 6 international organisations representing Arctic Indigenous

Peoples have permanent participant status.

(Arctic) High Seas

In the law of the sea, the High Seas lie beyond the 200-nautical mile limit of the (Arctic)

States. For the Arctic, this coincides roughly with the North Pole. The High Seas do not belong

to any national jurisdiction, so technically they could be exposed to any commercial or military

activity (fishing, oil and gas and mineral extraction, as well as defence) by anyone and any

nation. However, the region is permanently covered by ice and therefore it has not yet been

exposed to any extraction activity due to the current state of technology. Climate change and

increasingly reduced ice coverage may, however, open new access and routes to the Arctic

High Seas.



2.3 Other Collaborative Initiatives

Access to Medicine Index (ATM)

Launch Date: 2012 Status: Open Country Focus: Global Asset Class Coverage: Equity Number of Companies Targeted: 20 Participation: Signatory Lead Organisation: Access to Medicine Index

Background and Objectives

The ATM index ranks pharmaceutical companies’ efforts to improve access to medicine in developing countries. Funded by the Bill & Melinda Gates Foundation and the UK and Dutch governments, the Index has been published every two years since 2008. The purpose of the investor statement is to reaffirm the importance of access to medicine and to encourage pharmaceutical companies to take this issue into account for their growth strategies in developing countries.

As a responsible investor, Mirova places great emphasis on this issue when selecting the companies in which it invests and integrates the Index’s analysis in its evaluation of pharmaceutical companies. Mirova also works closely with the access to medicine project team to improve its methodology, on three issues in particular:

• Adapting the access to medicine strategy countries’ priorities

• Broadening the scope to include vaccines and generics

• Broadening the scope to include developed countries

Activities in 2017

In 2017, Mirova continued engagement with Roche as lead investor, following the letter sent the previous year on behalf of 47 signatory investors to encourage them to participate in the index questionnaire for the following raking (2018). We conducted dialogue with the company on behalf of signatory investors and pushed for better disclosure around access to medicine efforts, especially given that Roche did not participate to the 2016 index.

Next Steps

Investors will analyse the findings from the questionnaires and will continue engagement with the companies.

Access to Nutrition Index (ATNI)

Launch Date: 2014

Status: Open Country Focus: Global Asset Class Coverage: Equity and Fixed-Income Number of Companies Targeted: 13 Participation: Signatory Lead Organisation: Access to Nutrition Index


Companies that are applying strong nutrition policies and practices globally are in a better position to reduce the risk of increasing food and beverage industry regulation and to take full advantage of changing consumer trends towards healthier living. The Access to Nutrition Foundation concludes that while some companies have taken positive steps since the last ranking in 2013, the food and beverage industry is moving far too slowly. Good nutrition policies and practices are integral to food & beverage companies' overall business and financial performance as well as long-term sustainability. The objective of this engagement is to determine with the companies how they integrate findings and recommendations of the ATNI into improving their performance on nutrition practices.

Activities in 2017

Letters were sent to targeted companies. Calls and conversations were had to further understand their progress in access to nutrition and how they take into consideration the ATNI in their processes. A different strategy is being reflected upon on how to reach companies who are non-responsive.

Next Steps

Engagement with companies will continue. Progress will be measured based on their performance on the ATNI.



Antibiotics Overuse in Livestock

Launch Date: 2016 Status: Open Country Focus: UK & US Asset Class Coverage: Equities and Fixed-Income Number of Companies Targeted: 10 Participation: Signatory

Lead Organisation: FAIRR Network


Around 80% of antibiotics produced in the US are used on farm animals (45% in the UK, resulting in a significant risk of developing drug resistant bacteria. Most of these antibiotics are used for purposes other than the treatment of sick animals such as growth promotion and routine disease prevention due to closely confined and unsanitary conditions. The WHO has signalled that the high proportion of antibiotics given to farm animals poses a significant public health risk contributing to an emerging global "post-antibiotic" era. As such, this investor engagement team managed by FAIRR and ShareAction has sent letters to the top 10 US and UK restauranteurs, asking them to publish their policies about antibiotic use in livestock that specifically prohibits the use of all medically important antibiotics in their entire meat and poultry supply chain for purposes other than disease treatment or non-routine control of illness and to put in place time-bound actions for implementation of these policies. .

Activities in 2017

Company responses were relatively positive with regards to the letters we sent out end of 2016. Discussions and calls were had with the targeted companies. Through these discussions and their responses, FAIRR was then able to create a benchmark of the different practices of the companies targeted. This benchmark is however not public.

Next Steps

The engagement will continue with the original 10 and additional 10 companies for 2018. For the companies who have emerged as leaders, they will be asked to report on the policies they have committed to already. For the laggard companies they will be asked to broaden the scope of any policy they do have and report on the use. Focus will be made on commitments for pork and beef, given as most progress has been on poultry.

Climate Action 100+

Launch Date: 2017 Status: Open Country Focus: Global Asset Class Coverage: Equities and Fixed-Income Number of Companies Targeted: >100 Participation: Signatory Lead Organisation: AIGCC, Ceres, IGCC, IIGCC, PRI.


The Climate Action 100+ has been launched at the One Planet Summit and is backed by 225 investors (totalling $26.3 trillion in AuM). Climate Action 100+ is supported and co-ordinated by five partner organisations: Asia Investor Group on Climate Change (AIGCC); Ceres; Investor Group on Climate Change (IGCC); Institutional Investors Group on Climate Change (IIGCC); and Principles for Responsible Investment (PRI). It builds upon the collaborative investor engagement pioneered since 2012 by the four organisations that together form the Global Investor Coalition on Climate Change. The initiative aims to secure commitments from the boards and senior management to:

-Implement a strong governance framework which clearly articulates the board’s accountability and oversight of climate change risk and opportunities.

-Act to reduce greenhouse gas emissions across their value chain, consistent with the Paris Agreement’s goal of limiting global average temperature increase to well below 2-degrees Celsius above pre-industrial levels.

-Provide enhanced corporate disclosure in line with the final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and sector-specific Global Investor Coalition on Climate Change Investor Expectations on Climate Change* (when applicable) to enable investors to assess the robustness of companies’ business plans against a range of climate scenarios, including well below 2-degrees Celsius scenario, and to improve investment decision-making.

Activities in 2017 Mirova is a signatory of this initiative.

Next Steps First progress report will be disclosed in Q3 2018



Child Labour in Cocoa Supply Chains

Launch Date: 2017 Status: Open Country Focus: Global Asset Class Coverage: Equities and Fixed-Income Number of Companies Targeted: 2 Participation: Signatory

Lead Organisation: GES

Background and Objectives Significant efforts have been and continue to be carried out against child labour in cocoa supply chain. Nevertheless, despite these efforts, child labour is still spread throughout the cocoa farms in West Africa – namely Ivory Coast and Ghana, the leading producers of cocoa collectively making up 70% of global production. Estimates say that over 2 million children continue to work in hazardous conditions. While during the Harkin-Engel protocol (a.k.a. the Cocoa Protocol), an international agreement aimed at ending the worst forms of child labour and forced labour in the production of cocoa, the industry has made pledges to stop such practices, a lot of work remains to be done. The purpose of the engagement is for companies to apply the following asks: 1) Roll out systems to identify and remediate cases of child labour in the cocoa supply chain 2) Provide support to cocoa-growing farmers for them to move towards a living income

Activities in 2017 A letter was sent out to the companies showing their results on the benchmark of their practices to the company. One to one meetings / calls were held with the companies to discuss their results and ways to improve.

Next Steps Discussions with companies will be continued on how to improve their ratings in the benchmark.

FAIRR Investor Statement on Antibiotics

Launch Date: 2017 Status: Closed Country Focus: Global Participation: Signatory Lead Organisation: FAIRR


This investor statement aims to show a broad investor support for responsible

antibiotic stewardship policies to address the systemic risk this issue presents across multiple sectors including food, pharma, healthcare and insurance.

Activities in 2017

The investor statement was released during Antibiotics Awareness Week.

Investor Statement on Bangladesh

Launch Date: 2017 Status: Closed Country Focus: Bangladesh Participation: Supporter Lead Organisation: ICCR


The purpose of this statement is to call the attention of the Bangladesh government, textile companies, the Bangladesh Accord and the Alliance on the different remedies that remain to be addressed and to broaden the scope to also focus on freedom of association (following the government crackdown on union leaders and garment workers after the wage strikes) and to include other players of the supply chain where similar risks exists (washing, dying, fabrics, leather and home textiles).

Activities in 2017

The statement will be released on the 4th anniversary of the Rana Plaza collapse, 24 April, Monday.



Investor Statement on World No Tobacco Day

Launch Date: 2017 Status: Closed Participation: Signatory Lead Organisation: AXA

Background and Objectives Every year on May 31, the World Health Organization (WHO) marks World No Tobacco Day to highlight the threat that tobacco use proposes to the health and economic well-being of citizens of all countries and to advocate for policies to reduce tobacco consumption. The theme for 2017 was “Tobacco – a threat to development”. The investor group those took this opportunity to applaud the tobacco control measures already taken by governments around the world, encourage them to continue their efforts, and lend its support to global action against the tobacco

epidemic and its significant cost to society and development.

Activities in 2017 Public support and signature to the open letter.

Investor Letter on LGBT Rights in the USA

Launch Date: 2017 Status: Closed Country Focus: USA Participation: Signatory Lead Organisation: Trillium Asset Management, New York City Controller

Background and Objectives The open-letter to the legislative and executive branches of the Texan government seeks to prevent legislation that would legalize workplace discrimination against the Lesbian, Gay, Bisexual and Transgender (LGBT) community in the state. In the letter, the signatories make it clear that they consider any discriminatory legislation passed in the state would make it difficult for their portfolio companies to attract and retain talent. Moreover, the passing of such legislation could also entail major economic damage to portfolio companies. According to the Texas Association of Business, the passing of such pieces of legislation could involve at least $964 million and up to 185,000 job losses. This could potentially spread to other states, with equally devastating economic effects. Through this letter, the signatories intend to persuade the Texan legislation that passing discriminatory legislation such as the SB6 will obstruct their economic activities in the state and cause expensive losses for Texas.

Activities in 2017 Public support and signature of the open letter.

RE100

Launch Date:

2015 Status: Open Country Focus: Global Asset Class Coverage: Equity and Fixed-Income Number of Companies Targeted: 22 Participation: Signatory Lead Organisation: ShareAction

Background and Objectives RE100 showcases and recognises companies that make a public pledge to move to 100% renewable electricity for their international operations by an agreed date. ShareAction is working in partnership with RE100, an initiative of the Climate Group and CDP, which launched in Climate Week 2014. ShareAction is mobilising shareholders to encourage the world’s largest companies to join the RE100 initiative, and thereby accelerate the decarbonisation of the global economy and the move to renewable energy.

Activities in 2017 Engagement and discussions were held with companies who received letters in the prior year.

Next Steps Current priority sectors for 2018 include power generation, cement, automotive, food and beverage, retail, building and construction, and IT. The target is to conduct engagement with 60 companies in 2018.



Sustainable Protein

Launch Date: 2016 Status: Open Country Focus: Global Asset Class Coverage: Equity and Fixed-Income Number of Companies Targeted: 10 Participation: Signatory

Lead Organisation: FAIRR Network & ShareAction


Livestock production accounts for 14.5% of GHG emissions. According to research by the Chatham House, to reach the 2°C goal, the consumption of meat and dairy needs to be reduced.

This collaborative engagement is a call for companies to think strategically about building sustainable protein supply chains and increasing exposure to protein diversity (exploring protein alternatives). Companies should be encouraged to set targets for increasing exposure to protein alternatives, such as publishing a

strategy and key milestones to monitor progress. This engagement also suggests actions such as choice architecture in retail settings through preferential positioning and price points that allow for affordability.

Activities in 2017

Letters were sent to the companies.

Next Steps

This year, work will continue with the existing companies on their strategic approach to this issue, focusing on targets and metrics for protein diversification. There is also a possibility to add up to 10 companies to the engagement (peer retailers and manufacturers). The list will be developed in the beginning of 2018 then sent to the investor group for their feedback.

WDI - Workforce Disclosure Initiative

Launch Date: 2017 Status: Open Country Focus: UK and Europe Asset Class Coverage: Equity and Fixed-Income Number of Companies Targeted: 77 Participation: Signatory

Lead Organisation: Share Action Type of Engagement: Collaborative


The Worker Disclosure Initiative (WDI) is a project modelled by the Carbon Disclosure Project that aims to make available comparable information on how companies are treating their workforce (both direct and throughout their supply chain). The main objective is that these companies will provide such information annually to allow investors to use this information into the investment process. The themes to be covered are the following: workforce composition, workforce development, workforce engagement and workforce stability.

The WDI is funded by the Department for International Development (DfID), the UK’s counterpart to France’s AFD. The WDI is also working in partnership with the Oxfam for the expertise of workforce practices throughout the supply chain particularly in developing countries and their history of engaging with companies.

Activities in 2017

Letters were sent out to targeted companies through the course of 2017 asking them to answer the workforce questionnaire enclosed. One to one meetings were held with 30 companies to provide support to responding the questionnaire and to receive feedback in the pilot process. 43 companies did not submit survey responses with 23 companies citing reasons why.

Next Steps

A roundtable will be held beginning of 2018 to discuss the findings and next steps. The WDI will also start the consultation process for the Year 2 survey and will launch the pilot year report. A workshop will also be held Spring 2018 between companies and investors. Year 2 survey will be sent out by mid-2018 to a broader range of companies.



2.4 PRI Engagement Platform Initiatives

HUMAN RIGHTS IN THE EXTRACTIVES

Launch Date: 2014 Status: Ongoing Country Focus: Global Number of Companies Targeted: 47 Number of Engagements as Lead Investor: 2

Background and Objectives Mirova joined the Steering Committee on Human Rights in the Extractives in 2014 with the aim of better understanding companies’ approach to minimising and managing human rights risks related to their operations and encouraging best practices.

Activities in 2017 In 2017 investors used a scorecard put together the previous year based on their engagement dialogue with the companies to engage on specific issues that needed improvement. Mirova thus led again the engagement with Barrick Gold. Through a conference call, we enquired about the effectiveness of the company’s grievance mechanisms, as well as on their business relationships with their Chinese partners in the context of Joint Venture in areas with high human right-breach risk, such as the Porgera mine in Papua New Guinea. We praised the company’s improvements in protecting human rights of workers and communities in their global operations, and encouraged them to report KPIs on the effectiveness of grievance mechanisms to allow monitoring and dialogue for improvement. We also pushed for advanced disclosure on the results of the investigations following incidents with local communities around the Porgera mine, which represents the most sensitive area of operation for Barrick.

Next Steps We reported our findings to the Steering Committee which will decide whether the engagement will have a follow up going forward depending on investors’ findings. At present thus, the engagement initiative as such is concluded.

CORPORATE TAX RESPONSIBILITY

Launch Date: 2017 Status: Ongoing Country Focus: Global Number of Companies Targeted: 275 Number of Engagements as Co-Lead Investor: 2

Background and Objectives Aggressive corporate tax planning may represent a major loss for countries and their population, and may result in negative financial and reputational implications for companies. Greater corporate transparency across areas such as tax policy, governance and financial information would help investors better identify these risks. The gathering momentum for tax reforms across jurisdictions offers a great opportunity to initiate a collaborative engagement on responsible corporate tax.

This engagement will provide opportunity for investors to engage with high risk companies to enhance corporate income tax disclosure and encourage the development of responsible corporate tax strategies and relevant implementation.

Activities in 2017 The collaborative engagement was launched towards the end of 2017. Most actions will be done throughout the course of 2018.

Next Steps The investor group will now discuss on the different asks to be sent to the company and agree on the final draft of the letter to be sent. These letters will be then sent throughout the course of 2018 with discussions with companies to start not long thereafter.



DEFORESTATION IN CATTLE SUPPLY CHAIN

Launch Date: 2017 Status: Ongoing Country Focus: Global Number of Companies Targeted: 275 Number of Engagements as Co-Lead Investor: 2

Background and Objectives Cattle production in the agricultural sector has been identified as a leading driver of tropical deforestation. This happens primarily through the conversion of forest to pasture and through the cattle industry’s demand for soy-based feed products. Furthermore, the land use change increasingly risks degrading the welfare of communities that depend upon these forests for livelihood.

Under a two-degree scenario, countries cannot achieve their Nationally Determined Contributions without reducing emissions from land use and land use change driven by the production of soft commodities in tropical forest regions. Companies with supply chain exposure to these commodities, and their investors, should anticipate that country-level efforts will increasingly impact their activities. Impacts could include regulatory risk, legal, reputational and social risks and transition risks. Additionally, maintaining a deforestation-free

supply chain can contribute to a company’s competitive advantage, strengthen its long-term financial stability, and provide other opportunities such as cost-savings, improved relationships with stakeholders and improved ability to protect reputation.

This engagement working group was established with the following objectives:

• To improve transparency and quality of disclosure related to the source and materiality of deforestation-risk focus commodities, and how they move through the supply chain;

• To achieve full commitment by companies to no deforestation and no human rights violations throughout the entire supply chain;

• To improve traceability and supplier verification approaches for the deforestation-risk focus commodities throughout the entire supply chain; and,

• To encourage participation in collaborative forums to develop standards, policies, certifications, and/or tools to facilitate deforestation-free supply chains for the deforestation-risk focus commodities.

Activities in 2017 The collaborative engagement was launched towards the end of 2017.

Next Steps The investor group will now discuss on the different asks to be sent to the company and agree on the final draft of the letter to be sent. These letters will be then sent throughout the course of 2018 with discussions with companies to start not long thereafter.



3. ADVOCACY FOR

IMPROVING &

DEVELOPING THE

RESPONSIBLE

INVESTMENT

MARKET

Summary and Key

Figures (p.55)

3.1 Advocacy: How it

Works (p.56)

3.2 Mirova’s Advocacy

Objectives (p.57)

3.3 Government

Authority Considerations

(p.58)

3.4 Financial Centre

Considerations (p.60)

3.5 Specific 2017

Initiatives (p.63)

3.6 Supporting University

Research (p.66)



Advocacy for Improving and Developing the Responsible

Investment (RI) Market


Advocacy is conducted to promote our vision

within the responsible investment market. We

speak with national and transnational regulatory

bodies as well as with RI professional

organisations to encourage specific regulations

and standards for sustainable finance.

Advocacy Goals: Mirova promotes the

development and structuring of a sustainable

finance market that serves the needs of the

economy. Mirova’s goals are:

- To provide investors with the means to

identify the needs of sustainable

investment (disclosure);

- To remove the obstacles to the

development of the sustainable

investment market and to provide the

tools needed to do so (labels);

- To strengthen sustainable investment

within the financial industry.

Main Advocacy Actions in 2017

Developing Sustainable Finance

Membership and very active contribution

to the EU Commission’s High-Level

Expert Group (HLEG) on sustainable

finance works, intermediary and final

reports;

Chairmanship of and contribution to

Finance for Tomorrow, the Paris

Europlace Green & Sustainable Finance

Initiative, that organized the Climate

Finance Day;

Support university research, with

financial support for the Energy and

Prosperity Chair, and membership of

Mirova’s CEO, Philippe Zaouati, at the

Cambridge Institute for Sustainable

Leadership

Supporting Climate Action & Disclosure

Response to public consultations such as

the Task Force on Climate-Related

Financial Disclosures (TCFD)

Support several investor statements and

letters for more climate actions and TCFD

disclosure guidelines that were sent to the

following governmental bodies:

- G7 and G20 countries

- EU Ministries of Environment

- US Presidency

- World Leaders

Publishing of Papers

Draft publication for Finance for Tomorrow

explaining the stakes of the HLEG Interim

report

Mirova is a member of a wide number of

organisations supporting sustainable finance



3.1 Advocacy: How it Works

As a leader in the European responsible investment market, Mirova is committed to developing

sustainable finance and a strong responsible investment market through lobbying and advocacy.

Mirova’s engagement approach for regulatory bodies is exemplified by its philosophy, which

promote an investment approach based on strong convictions that combine economic,

environmental, and social value creation. The primary goal of Mirova’s advocacy is to contribute

to the development and structuring of a finance industry that has positive impacts on the

environment and on our society.

Advocacy goals backed by Mirova’s Responsible Investment Policy

Mirova has been formalising its advocacy since 2016. It defines its goals based on its Responsible

Investment Policy. Mirova’s advocacy seeks to promote a very qualitative approach to investment

for public and private regulatory bodies.

The goals presented above began in 2016 and are set for 2017-2019. Yearly priorities were defined

so that actions can be adjusted according to changes in the political and legislative calendars.

Tools for advocacy

Mirova’s approach to advocacy is based on a variety of tools:

- Interacting directly with public authorities and contributing to their considerations at the

French, European, and international levels through responses to public consultations and

participation in working groups and expert panels,

- Supporting and participating in professional responsible investment organisations and their

reflections at the French, European, and international levels,

- Writing publications and position papers,

- Participating in conferences

- Supporting university research

A transparent approach

Mirova publishes its advocacy goals, in addition to its responses to public consultations, on its

website.

Mirova is also registered on the European Union’s Transparency Register and since 2017 on the

new French Transparency Register (Répertoire des représentants d’intérêt de la Haute Autorité

pour la Transparence de la Vie Publique - HATPV).



3.2 Mirova’s Advocacy Objectives

Focus 1

Establish a market environment favourable to the development of finance with a positive

environmental and social impact.

1. Demonstrate the need for reallocation of capital to long-term societal needs and to innovate

in integrating environmental and social externalities into the market’s operations and

investment products.

2. Promote a definition of responsible investment that corresponds to investment with a

positive, long-term, and committed impact.

3. Promote development of green and sustainable financial centres in France and Europe.

Focus 2

Provide investors with the means to identify the needs and opportunities of sustainable

investment.

4. Promote regulations on increased ESG reporting based on a life cycle analysis for each asset

class, allowing investors to choose their investments based on relevant and complete

sustainable development criteria.

5. Promote access to markets and investors for projects and companies with positive

environmental or social impacts, particularly via:

(i) development of public investment plans to implement international sustainable

development goals (Paris agreement, UN’s Sustainable Development Goals)

(ii) development of private companies and projects with positive impacts and facilitating

their access to market financing (including for small and medium companies).

Focus 3

Remove obstacles and create tools for developing the sustainable investment market.

6. Promote long-term sustainable investment, particularly for institutional investors (fiduciary

duty, terms, etc.).

7. Encourage the creation of high quality standards or labels to favour investment products

with positive impacts to reinforce their quality and utility, and avoid the risks of

greenwashing.

8. Encourage transparency and measure investors’ contributions to the sustainable

development goals by evaluating the environmental and social impacts of their portfolios.

Focus 4

Strengthen sustainable investment’s position in finance.

9. Make sustainable investment financially attractive both for investors and issuers.

10. Encourage innovation and collaboration with stakeholders (public, government institutions)

to facilitate the financing of projects with positive sustainable impacts.



3.3 Investor Statements signed in 2017

Investor letter in response to USA’s Paris Agreement Withdrawal

Date: June 2017 Participation: Supporter Lead Organisation: Ceres


The purpose of the open letter is to illustrate to the American administration that major companies active in the USA and around the world are still committed to the engagements made in Paris. The open letter, which is expected to amass signatories with an AUM greater than 17 trillion USD will send a clear signal to the American administration that domestic and international companies intend to stick to the below 2°C scenario, and adjust their strategic plans accordingly. It is also highly important to show the rest of the international community that major institutions active in the US and elsewhere will remain committed to the Paris Agreement despite the administration’s reluctance to do so, to ensure that the Agreement is not weakened further in the future.

Activities in 2017

Public support and signature to the open letter.

Investor Statement to the G7

Launch Date: 2017 Status: Closed Participation: Signatory Lead Organisation: IIGC, CDP, PRI


The purpose of the open letter is to encourage G7 governments to continue their support and commitment to the Paris Agreement. Furthermore, the letter will urge leaders to maintain their NDC (Nationally Determined Contributions) implementation in 2017 – as well as reinforce their NDCs for the future – and develop 2050 climate objectives. Furthermore, the letter urges governments to support investments into a low-carbon economy in addition to reducing subsidies enjoyed by the fossil fuel industry. Lastly, the letter encourages G7 governments to support the integration of climate-related financial frameworks, such as the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).

Activities in 2017


Low Carbon USA

Launch Date: 2017 Status: Closed Participation: Signatory Lead Organisation: Ceres, C2ES, Environmental Entrepreneurs, The B Team, The Climate Group, the WWF and other organisations


The letter calls for the US government to remain committed to its low-carbon policies domestically and internationally to meet or go beyond the US’s national commitment and the continued investment in the low carbon economy in the American market and abroad to provide members of the business community with clarity. Lastly, the letter calls for the United States to continue its participation in the Paris Agreement, to ensure the global temperature does not rise above 2°C.

Activities in 2017

Public support and signature of the open letter.



Statement of Support for TCFD Aligned Disclosure

Launch Date: December 2017 Status: Closed Country Focus: Global Participation: Signatory Lead Organisation: Financial Stability Board TCFD Secretariat and Bloomberg


Public support of businesses to the climate disclosure guidelines of the Financial Stability Board's TCFD (Task-Force on Climate Financial Disclosure), in the framework of the One Planet Summit.

Activities in 2017

Public support to the statement launched for the One Planet Summit

Next Steps

Integration of requests on the TCFD guidelines into Mirova individual engagement letters.

Green Growth Platform – Business Statement on Climate

Launch Date: 2017 Status: Closed Country Focus: Europe Participation: Signatory Lead Organisation: CISL


The current post-Paris global context suggests that now more than ever, leadership will be crucial to deliver an effective and forward-looking low carbon economy. There is however a danger that dossiers in the energy and climate sphere could be pushed aside or kept waiting while the EU deals with the other pressing issues it faces. Delays to an already challenging and prolonged policy process will affect the clarity and certainty needed to unlock investment from the private sector. The investor group would like to demonstrate that progressive businesses will welcome swift, effective policy making.

The June environment council is due to have a policy discussion on both Effort Share and LULUCF. While these aren’t topics that we are trying to promote a

specific position on, it provides a good moment to publicly remind ministers of the need for ambition and EU leadership on climate issues, particularly considering all the various pressing issues currently on the agenda.

Activities in 2017




3.4 Financial Centre Considerations

Participation in projects and reflections with professional and international organisations

Support at the Global Level

Mirova is a member of several international initiatives that support the development of responsible

investment practices, as well as green and sustainable finance:

UNEP FI: Member of the Investment Committee of the UNEP Finance Initiative, which seeks

to bring together the financial sector and the United Nations Environment Program. Mirova

participates in the Positive Impact Finance working group and steering committee.

PRI: Signatory of the Principles for Responsible Investment, which seek to promote

responsible investment practices internationally. Mirova commits to respect and ensure its

continued commitment to the 6 principles. Signatory organisations are required to respond

to an annual questionnaire and to publish a follow-up report. Mirova is also a member of

the Human Rights Steering Committee and participating in other PRI-organised

collaborative engagements.

CISL: Partnership with the Cambridge Institute for Sustainability Leadership, an institution

of Cambridge University that acts to inform and support business and policy leaders to act

on issues of global importance, such as sustainable development.

IIGCC: Member of the Institutional Investors Group on Climate Change, a forum for

collaboration on climate change, that brings together more than 120 institutional investors.



CERES: Member of CERES and the Investor Network on Climate Risk. CERES is global

organisation that motivates businesses to act on climate change. The Investor Network on

Climate Risk is a grouping of over 120 institutional investors that address climate change

while investing in low-carbon opportunities.

US SIF: Member of the US Forum for Sustainable and Responsible Investment, a group

that advocates developing sustainable and responsible investment throughout all asset

classes.

Support at the European Level

HLEG: The High-Level Expert Group on sustainable finance is a European Commission

supported assembly of 20 experts in the field of sustainable finance. Mirova’s CEO, Philippe

Zaouati, was selected as a member in December 2016. The group has formulated a series

of proposals for the European Commission on how to better integrate sustainability into the

financial system.

EUROSIF: Mirova’s policy and advocacy officer represents the French Social Investment

Forum at the EUROSIF board.

Finance for Tomorrow (within Paris Europlace): Member, through Natixis AM, of the Paris

Europlace association, which is the organisation in charge of promoting and supporting the

development of the financial centre of Paris. Mirova actively promoted the development of

Finance for Tomorrow, the Paris Green and Sustainable Finance Initiative, launched in May

2016, and chaired today by Mirova. Mirova also participated previously in the Paris

Europlace working group on Green Bonds and infrastructure.

FIR: The French Social Investment Forum (Forum français de l’Investissement Socialement

Responsible). Mirova participates in the CorDial initiative, a platform for dialogue with

companies on issues related to Sustainable Development and Corporate Social

Responsibility. Mirova is also on the Board at the FIR both as member and Vice-President.

SRI Label Committee: The SRI Label is a French investment label that provides individual

and institutional investors with a greater level of clarity on socially responsible investment

funds. A committee was created to ensure the good functioning of the label and its

development.

Asset Management

AFG: The Association Française de la Gestion Financière brings together players in the

French asset management industry and promotes their interests. The association is also

dedicated to the promotion of ESG issues through the work of a dedicated committee, of

which Mirova is a member.

EFAMA: EFAMA is the main association of the European investment management industry.

Mirova participates in the working group on responsible investment and corporate

governance. Mirova is a member of the SRI Commission.

Green Bonds

ICMA-Green Bond Principles: Mirova participates in ICMA’s Green Bond Principles, which

seek to create unifying standards for the green bond market through transparency and

disclosure. Mirova is also on the Board and Executive Committee of the group, as well as

the working groups on impact reporting, green projects eligibility, social bonds and labels.

Climate Bonds Initiative: Member of the Climate Bonds Initiative, an organisation that

seeks to develop the green bond market to reduce the cost of capital for projects fighting

climate change.



Sustainable Infrastructure

GIB: Supporter of the Global Infrastructure Basel foundation, a Swiss-based group that

promotes responsible infrastructure investments.

GISB: Mirova supports and is a member of the Global Infrastructure Sustainability

Benchmark, which seeks to develop standardised tools and methods for comparing ESG

practices in infrastructure investments.

GRESB: Member of the Global Real Estate Sustainability Benchmark, a global association

that provides members with extra-financial data to properly assess real estate and

infrastructure assets.

Private Equity

AFIC: Mirova is a member of the Association Française des Investisseurs pour la

Croissance, which is a group that connects French asset managers. Members of the AFIC

are actively engaged in financing local growth in France through investing in SMEs.

Transparency and Disclosure

CDP: Signatory, through Natixis, of the Carbon Disclosure Project, which seeks to improve

the quality of carbon/climate information disclosed by issuers.

Integrated Reporting: Member of Integrated Reporting, which seeks to define an

Integrated Report that must contain, in a synthetic and interconnected form, relevant

financial and extra-financial information relating to the company.



3.5 Specific 2017 Activities

In 2017 Mirova continued to contribute to the reflections of regulators and market players on the

development of appropriate tools and frameworks to promote sustainable finance, with specific

contributions at the EU level, improving ESG disclosure for companies and for the financial sector.

Developing Sustainable Finance

European Commission High-Level Expert Group (HLEG) on Sustainable

Finance

In December 2016, the European Commission unveiled the composition of a High-Level Expert

Group on Sustainable Finance (HLEG), which will be working on recommendations to draft a

comprehensive EU strategy on sustainable finance throughout 2017. The recommendations of

this group will play a key role in the build-up to the EU’s 2030 sustainable development agenda.

The group consists of 20 leaders across civil society groups, the financial sector, and academia.

CEO of Mirova, Philippe Zaouati, was selected as one of these experts, confirming Mirova’s and

Natixis Asset Management’s leading role in sustainable finance.

Why did Mirova participate?

It was an honour for Philippe Zaouati to be selected as an expert of the HLEG. The ambition of

the HLEG increased throughout the year, with a strong political momentum at the EU level to

support its works and promote sustainable finance. This window of opportunity to change finance

at such a scale could not be missed.

What did Mirova support and how?

Mirova actively contributed to the works of the HLEG through attendance to monthly plenary

meetings, coordination of workstreams, direct contribution to the drafting of recommendations.

Mirova’s contribution particularly focused on the following issues:

- Promotion of ESG and climate disclosure for corporates and for the financial sector, in

order not only to take account of climate-related and ESG risks but also to enable

investors to identify investment opportunities to support the energy and ecological

transition;

- Development of an EU taxonomy of sustainable assets as the basis for additional market

tools such as standards and labels;

- Support to the development of standards for green financial products such as green

bonds;

- Strong support to the empowerment of retail investors and EU citizen to invest

sustainably through the proposal of a “retail package” including:

- consultation of retail investors on their sustainability preferences;

- disclosure of impact of all retail investment funds;

- establishment of minimum standards for SRI funds;

- development of a green label for green funds.

Mirova also actively contributed to promote the works of the HLEG through interviews,

participation to and organisation of dedicated panels, articles and tribunes, etc.

Next steps: Following up on the release of the HLEG’s interim and final reports, the EU

Commission will release a dedicated action plan in March 2018 that should build on the HLEG

recommendations to promote sustainable finance at the EU level.



Launch of Finance for Tomorrow (Paris Europlace)

In November 2016, Paris EUROPLACE – the Paris marketplace association whose objective is to

strengthen and promote Paris as a financial centre – published the Green and Sustainable

Finance Initiative, a report coordinated by Mirova. With this report, Mirova sought to illustrate

the weight of the financial marketplace in Paris in sustainable finance, and what measures can

be implemented to advance it further.

The report notes that Paris is very well situated as a future centre for green and sustainable

finance. After more than 40 interviews with key players in the Paris sustainable finance

ecosystem, Mirova drafted 15 key recommendations, that led to the creation of Finance for

Tomorrow, the Paris initiative for sustainable finance.

The initiative aims to promote sustainable finance in France and internationally and to contribute

to direct financial flows towards a low carbon and inclusive economy. Finance for tomorrow’s

governance consist in a bureau, which defines roadmap, objectives and monitors the budget and

whom president (currently Philippe Zaouati, Mirova’s CEO) is re-elected each year. The second

body is the plenary committee, open to all the members and which meets 3 to 4 times a year to

inform the members on ongoing actions and to discuss the priorities.

The 15 recommendations that led to Finance for Tomorrow initiative were used as a basis for 6

working groups (Research, Innovation, Public affairs, Climate Financial Disclosure, Green bonds,

International promotion and networking) in which Finance for Tomorrow participates. Parallelly

In 2017, the initiative has supported the Climate Finance Day, the One Planet Summit and has

published the “50 Climacts” (actions that members of the initiative will implement).



Supporting Climate Action and Disclosure

Task Force on Climate-Related Financial Disclosures (TCFD) Consultation

Why did Mirova respond? In 2016, the Financial Stability Board established a Task Force on

Climate-related Financial Disclosures (TCFD). Its objective is to define what climate-related

disclosures should be included in issuers’ annual reporting. Two public consultations were

launched on the TCFD’s work. The objective of the first consultation was for the TCFD to receive

advice on the scope of its recommendations. The objective of the second consultation, launched

in February 2017, was to seek advice on the recommendations on climate-related disclosures

released by the TCFD in December 2016. Mirova responded to both consultations to contribute

to the reflection on global climate disclosure guidelines.

What did Mirova support? Mirova’s response to the consultation conveyed Mirova’s perception

of the direction in which the TCFD’s recommendations are headed, as well as more disclosure-

specific suggestions. More specifically, Mirova suggested that:

- Climate-related disclosures be both meaningful and limited in quantity to be useful;

- Excessive complexity in disclosure obligations could hamper the success of the

TCFD’s recommendations if companies are unable to disclose comparable and

understandable information at a reasonable cost and/or if investors are not able

to use this information as a basis for decisions and capital allocation;

- Information disclosure and analysis should be distributed among the different actors in

the ecosystem; an important role should be given to the intermediaries between

companies and investors;

- Scenario analysis by companies should be limited to physical risks and to the current

situation of the company’s business;

- The analysis of transition risks should be assigned to third-party intermediaries;

- Guidelines for disclosure for the financial sector should focus more on the systemic risk

posed by not participating in financing the energy transition;

- It is not necessary to issue specific recommendations for non-financial sectors.

For the initial consultation, Mirova recommended that:

- Climate disclosure information should be prepared in a manner that provides investors

with long- and short/medium term perspectives;

Financial firms (owners of fixed income and equities) need to disclose climate-related

data; the entire financial industry needs to be involved as an audience for increased

extra-financial disclosure, placing investors and investment banks as the principal

audience.

Next Steps: The TCFD has analysed all stakeholder input and released a final report in June

2017. The stake is now to implement these recommendations worldwide.



3.6 Supporting University Research

With the goal of promoting sustainable finance and a new kind of corporate governance, Mirova

also supports various research initiatives.

Support for Two University Chairs

Mirova supports two university chairs:

- Energie et Prospérité (Energy and Prosperity) Chair was created in 2015 to clarify

decisions made by public and private entities steering the energy transition. The research

conducted is related to the effects of the energy transition on the economy (growth,

employment, debt), different industries (transport, construction, energy production,

finance), and their related means of financing. Housed by the Fondation du Risque, the

Chair is supported by the ADEME, Air Liquide, the Agence Française de Développement,

Caisse des Dépôts, Mirova, Schneider Electric, and the SNCF.

- Théorie de l’entreprise: modèles de gouvernance & création collective (Company

Theory: Corporate Governance & Collective Creation Models) Chair

This Chair is directed by Blanche Segrestin at the Centre de Gestion Scientifique at the

MINES ParisTech School. The Chair’s research essentially deals with a vision of the company

as a collective creation and re-vamping models and mechanisms for fair and solidary

governance. Mirova is associated with research articles published by students at the Chair

on governance issues.

Published studies include:

- Refonder l’entreprise (Reforming the Company) (B. Segrestin and A. Hatchuel, 2012), which

received various awards including the 2013 Prix Syntec for the best work in applied

management research

- L’entreprise, point aveugle du savoir (The Company, a Blind Spot) (co-directed by B.

Segrestin, B. Roger, and S. Vernac)

- La Société à Objet Social Etendu, un nouveau statut pour l’entreprise (The Company as a

Comprehensive Social Object, A New Status) (B. Segrestin, K. Levillain, S. Vernac, A.

Hatchuel, 2015).

The Chair added a new field of research as of October 2015, that of shareholder

engagement.

Direct Contributions

Mirova also directly contributes to research projects. In 2017 to the publication “Adopter une

vision globale du financement de la transition écologique” for the Energy and Prosperity Chair.



Mirova, represented by its CEO Philippe Zaouati, is a member of the Business

Green Growth Group, established by the Ministerial Green Growth Group to take a stand and

defend its financial and strategic vision of green growth, economising resources, and low carbon,

to make Europe a leader in ambitious climate goals.

In partnership with the University of Cambridge, Mirova created the Investment Leaders Group

(ILG), whose mission is to move the investment chain towards responsible long-term value

creation.

In 2015, Mirova signed the Statement on the reform of fossil fuel subsidisation. Some

40 governments and several hundred companies signed this Statement, organised by

the Prince of Wales’s Corporate Leaders Group.



Appendix

Individual Engagement Process

The engagement undertaken by Mirova’s teams is conducted for core assets for client accounts

that have chosen to participate in the engagement strategy. This engagement is based on the ESG

assessments of issuers and/or projects and the analysis of resolutions conducted by Mirova’s

responsible investment research team.

The engagement process used for companies’ ESG analysis occurs in 2 separate phases: ESG

assessment and dialogue. For the exercise of voting rights, the process has 3 phases:

communication of the voting policy, dialogue, resolution analysis. Mirova has also developed

specific engagement processes for green and social bonds and infrastructure.

Preferred Means of Engagement

Direct dialogue is the preferred means of conducting continuous engagement. This dialogue is

completed by letters and emails to various contacts in the company to inform them of possible

improvements and actions expected on the company’s part to improve their ESG practices.

ESG Assessment Engagement Process

Phase 1: Assessment of ESG Practices

Mirova’s research team follows up with core companies throughout the year on the quality of their

ESG practices based on various information sources:

• Publicly available data: annual/sustainable development reports, academic research, UN

reports, keeping up with the news, etc.

• Periodic exchanges with stakeholders: companies, unions, NGOs, the scientific community

(through partnership with the University of Cambridge)

• External research: financial or extra-financial brokers, extra-financial rating agencies,

proxies.

This follow-up keeps the ESG opinion up to date, enriches analysis of resolutions for the exercise

of voting rights, and allows us to target ways to improve practices in light of better standards and

changes in French regulations.

Phase 2: Dialogue

When assessing ESG practices, Mirova’s research team contacts the companies in question to

better understand the risks they are subjected to, as well as the opportunities provided by

sustainable development issues. The team seeks to challenge their CSR policies and quality of their

governance practices.

At the end of these exchanges and when the CSR assessment is finalised, the analysts send a letter

to the company highlighting primary suggestions for improvement.



The analysts remain in continuous contact with these companies, regularly meeting with their

contacts to keep up with changes made and to remind them of expectations for improvements in

practices. These exchanges can also be heard in the case of events or news reports revealing

deficiencies in important practices.

This continuous follow-up has even made it possible for Mirova’s teams to anticipate future risks

and identify ‘complicated’ situations requiring targeted engagement. Additionally, ESG

assessments can be affected by results of engagement processes conducted, either positively or

negatively.

Engagement Approach for the Exercise of Voting Rights

For Mirova and its clients’ primary positions, a specific engagement strategy is implemented before

general meetings to encourage companies to make progress in their practices. At the same time,

the state of the previously identified opportunities for improvement is reviewed and changes in

company practices are monitored.

The engagement process has 3 phases:

Phase 1: Dissemination of the Voting Policy

Before the voting season, Mirova sends its voting policy to all companies in the core universe. This

policy includes Mirova’s primary positions and those of its clients to inform companies of its voting

principles and to anticipate dialogue on subjects that will be addressed at the general meeting.

Phase 2: Dialogue

Before the exercise of voting rights, Mirova’s Voting and Governance division analyses the

proposed resolutions and identifies on which subjects Mirova will engage for each company based

on various information sources. These sources include information published by the company,

analyses by proxy and rating agencies, brokers, as well as ESG analyses conducted by the Extra-

Financial Research teams.

Either initiated by the Voting and Governance division or at the company’s request, a dialogue is

established on key governance issues identified by Mirova, as well as environmental and social

issues identified during the ESG assessment.

This dialogue occurs either in the form of face-to-face meetings, telephone conversations, or email

exchanges. These exchanges put the Voting and Governance division in contact with various

representatives, from Investor Relations managers to legal or governance officers to Board

presidents.

Phase 3: Resolution Analysis

At the end of the dialogue process, the research team releases a recommendation according to the

extent to which the engagement goals were achieved.

• If the engagement goals were achieved, a positive voting recommendation will be issued and the

engagement process is finished.



• If the goals were only partially achieved, a positive voting recommendation may be issued

and the engagement process will continue after the general meeting.

• If the engagement did not succeed, a negative voting recommendation could be issued

along with goals for more extensive engagement.

For clients that have delegated the exercise of their voting rights to Mirova, teams will establish

recommendations and rules for engagement according to the voting rules established ahead of

time with the client.

For clients that have delegated the execution of their voting and governance engagement policy

to a proxy advisor, Mirova’s teams will communicate the results of the dialogue and their voting

recommendations, which contribute to their reflections on voting decisions.

At the end of the process, the analysts inform the companies of how Mirova voted, specifying to

what extent measures taken or announced by the company were judged to be satisfactory and

expected foci for improvement.

Engagement Approach for Green and Social Bonds

To better structure this young market, Mirova’s teams are committed to continued dialogue with

current and potential green and social bond issuers.

We conduct our engagement in three phases:

Phase 1: Engagement with Companies Planning to Issue Sustainability Bonds

Mirova regularly participates in conferences and meetings to engage in dialogue with issuers that

have yet to issue green or social bonds to encourage them to do so. For issuers with a medium-

term plan to issue, Mirova encourages them to maintain high standards in terms of clarity of fund

use and transparency.

Phase 2: Engagement Before/At Time of Issue

All environmental and social bond issues being considered for investment by Mirova are analysed

by the research teams. During the evaluation process, Mirova’s research teams are in contact with



issuers to better understand the risks they are subject to and opportunities presented by the

issuance of a green or social bond. This is also a key time at which Mirova can encourage the issuer

to improve the environmental and social quality of the bond, particularly in terms of transparency

and impact reporting.

Phase 3: Engagement During Annual Reporting

As transparency is a particularly important aspect of ensuring the integrity of green and social

bonds, Mirova’s teams systematically review the annual reports of bonds held in its portfolios.

ESG assessments can be influenced by the results of this engagement after review of reports and

exchanges with the issuer.



Collaborative Engagement Process

Principles

The goal of collaborative engagement is to incite positive change in companies regarding a specific

ESG issue. The primary characteristics of this approach are as follows:

Precise

Engagement is targeted at a specific and significant ESG problem related to

sustainable development or governance issues that the company is exposed to due

to its sector, location, or practices.

Measurable

Defined engagement actions are associated with predetermined and measurable

objectives. Assessment criteria are defined as part of the action plan before it is

implemented.

Achievable

Engagement actions have realistic and achievable goals over a specified time span.

When engagement themes correspond to its sustainable development priorities, Mirova joins the

steering groups of initiatives led by the PRI or signs engagement letters and statements open for

signature by other investors.

The Engagement Platform

The engagement platform is comprised of Mirova’s experts and client representatives. It

is coordinated by Mirova’s Responsible Investment Research Team.

What it Does:

The engagement platform directs and tracks implementation of the engagement strategy

agreed upon by the institutions represented by the platform. It also suggests actions to

take if the engagement fails.

How it Works:

The engagement platform meets once or twice yearly to define its engagement strategy

and evaluate engagement actions. Ad hoc meetings can, however, take place throughout

the year in the case of an important event that requires urgent action.



Process

The platform’s collaborative engagement process occurs in three phases: planning, dialogue, and

evaluation.

Phase 1: Planning

The planning phase consists of defining the scope and actions to be conducted during a defined

engagement cycle according to the defined engagement policy.

This preliminary work is presented to the engagement platform, which then decides:

• The subject, goals, and means of the engagement; these goals are limited in number so

that they can be monitored and achieved by the company.

• The list of assets involved in the engagement;

• The action plan;

• The ways in which the results of the engagement will be measured.

Platform members can decide to associate themselves with all or some of the defined engagement

actions according to their sensitivity to the issue and their respective priorities.

Phase 2: Dialogue

At the initial stage of engagement, Mirova’s teams make a written request for a meeting to discuss

the chosen engagement issue with operations teams or Board members on the behalf of investors

that have decided to join the initiative. A dialogue is then begun by Mirova’s teams in which client

representatives can participate. This can take the form of face-to-face meetings, phone

conferences, or letters.

At the end of the dialogue process, Mirova’s teams send a letter to the company with feedback on

the exchanges with specific expected improvements. The teams then follow the changes in

company practices. If necessary, more exchanges on the changes in practices can take place.

Phase 3: Evaluation

At the end of the engagement cycle, an evaluation of actions conducted and results obtained is

established.

There are several options:

• The engagement goals were achieved the asset is removed from the platform’s scope

of engagement.



• The engagement goals were only partially achieved the engagement process is

reviewed in committee to decide if the cycle will be extended. Extension of the engagement

cycle primarily translates to establishing other means of engagement through investor

statements, membership in financial centre initiatives to influence industry practices, etc.

• The engagement goals were not achieved recommendations are given to investors

that participated in the engagement. The decision as to what to do after the

recommendations have been given by the committee is made by each investor

independently.

Preferred Means of Engagement:

The means of engagement undertaken by the platform are:

- Preparation of summaries of the state of affairs for controversies studied

- Establishment of a continuous dialogue and engagement letters from investors to

companies on their practices and transparency

- Establishment of dialogue with regulators (legislators, professional associations, etc.)

- Publication of investor statements addressed to companies and regulatory bodies

(governmental or professional organisations)

- Direct participation by Mirova on behalf of the platform in initiatives or professional

associations seeking to improve company practices.



DISCLAIMER



Disclaimer

This document is intended for professional clients only in accordance with MIFID. If no and you receive this document sent

in error, please destroy it and indicate this breach to Mirova.

Products and services do not take into account any particular investment objectives, financial situation nor specific need.

Mirova will not be held liable for any financial loss or decision taken or not taken on the basis of the information disclosed

in this document, nor for any use that a third party might make of this information. This document in no way constitutes

an advice service, in particular an investment advice.

This document is a non-contractual document and serves for information purpose only. This document is strictly confidential

and it may not be used for any purpose other than that for which it was conceived and may not be copied, distributed or

communicated to third parties, in part or in whole, without the prior written consent of Mirova. This document may not be

used in some jurisdictions where such offers or promotions have not been authorized by the competent authorities. Each

investor must ensure he complies with these requirements and prohibitions.

No information contained in this document may be interpreted as being contractual in any way. Information contained in

this document is based on present circumstances, intentions and beliefs and may require subsequent modifications. No

responsibility or liability is accepted by Mirova towards any person for errors, misstatements or omissions in this document

or, concerning any other such information or materials, for the adequacy, accuracy, completeness or reasonableness of

such information. While the information contained in this document is believed to be accurate, Mirova expressly disclaims

any and all liability for any representations, expressed or implied, with respect to this document. Prices, margins and fees

are deemed to be indicative only and are subject to changes at any time depending on, inter alia, market conditions. Mirova

reserves the right to modify any information contained in this document at any time without notice. More generally, Mirova,

its parents, its subsidiaries, its reference shareholders, the funds Mirova manages and its directors, its officers and partners,

its employees, its representative, its agents or its relevant boards will not be held liable on the basis of the information

disclosed in this document, nor for any use that a third party might make of this information. This document has been

created and prepared by Mirova based on sources it considers to be reliable. However, Mirova does not guarantee the

accuracy, adequacy or completeness of information obtained from external sources included in this document.

Additional Notes

This material has been provided for information purposes only to investment service providers or other Professional Clients,

Qualified or Institutional Investors and, when required by local regulation, only at their written request. This material must

not be used with Retail Investors.

In the E.U. (outside of the UK): Provided by Natixis Investment Managers S.A. or one of its branch offices listed below.

Natixis Investment Managers S.A. is a Luxembourg management company that is authorized by the Commission de

Surveillance du Secteur Financier and is incorporated under Luxembourg laws and registered under n. B 115843. Registered

office of Natixis Investment Managers S.A.: 2, rue Jean Monnet, L-2180 Luxembourg, Grand Duchy of Luxembourg. France:

Natixis Investment Managers Distribution (n.509 471 173 RCS Paris). Registered office: 43 avenue Pierre Mendès France,

75013 Paris. Italy: Natixis Investment Managers S.A., Succursale Italiana (Bank of Italy Register of Italian Asset

Management Companies no 23458.3). Registered office: Via Larga, 2 - 20122, Milan, Italy. Germany: Natixis Investment

Managers S.A., Zweigniederlassung Deutschland (Registration number: HRB 88541). Registered office: Im Trutz Frankfurt

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All amounts shown are expressed in USD unless otherwise indicated.

MIROVA French Public Limited liability company with board of Directors Regulated by AMF under n°GP 02-014 RCS Paris n°394 648 216 Registered Office: 59, Avenue Pierre Mendes France – 75013 – Paris Mirova is a subsidiary of Ostrum Asset Management. OSTRUM ASSET MANAGEMENT, S.A. Limited liability company Regulated by AMF under n° GP 90-009 RCS Paris n°329 450 738 Registered Office: 43, Avenue Pierre Mendes France – 75013 - Paris

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