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Natixis Sustainable Future 2020 N NSFDX Sustainability

Morningstar Medalist Rating
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Sustainability Analysis

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Sustainability Summary

 | Published as of .  Based on data as of

Natixis Sustainable Future 2020 Fund has a number of positive attributes that may appeal to sustainability-focused investors.

This strategy holds securities with low exposure to ESG risk relative to those of its peers in the Morningstar Target Date category, earning it the highest Morningstar Sustainability Rating of 5 globes. ESG risk measures the degree to which material environmental, social, and governance issues, such as climate change, biodiversity, human capital, as well as bribery and corruption, could affect valuations. ESG risk differs from impact, which is about driving positive environmental and social outcomes for society’s benefit.

Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of Natixis Sustainable Future 2020 Fund. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes. Natixis Sustainable Future 2020 Fund has an asset-weighted Carbon Risk Score of 7.4, indicating that its companies have low exposure to carbon-related risks. These are risks associated with the transition to a low-carbon economy such as increased regulation, changing consumer preferences, technological advancements, and stranded assets. Its 13.3% involvement in carbon solutions is higher than the 11.3% average involvement of its peers in the Target-date 2020 category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on.

Currently, the fund has 9.2% involvement in fossil fuels, which is roughly in line with 9.8% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. The fund exhibits moderate exposure (6.40%) to companies with high or severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. Such controversies can also damage the reputation of both companies themselves and their shareholders.

ESG Commitment Level Asset Manager

 | Basic , 

Natixis Solutions led the industry by launching an ESG target-date series in 2017, but the group will have to evolve further to stay competitive as the industry matures. The firm earns a Morningstar ESG Commitment Level of Basic. Natixis Solutions runs a limited lineup of multi-asset strategies that invest in funds managed by sibling affiliates of the holding company, Natixis Investment Managers. The flagship offering is a sustainable target-date strategy, but beyond the series' design and assignment of mandates, the manager selection team takes a relatively hands-off approach to ESG oversight and engagement, resulting in portfolios that are lackluster from an ESG perspective. Natixis Solutions does not have an ESG investment policy, and it doesn’t enforce consistent exclusions across the fund lineup (target-date or otherwise), instead largely relying on underlying managers to integrate ESG criteria as they see fit. This doesn’t measure up to peers who employ more-stringent screens on underlying managers. Furthermore, because the firm invests primarily in stand-alone funds, its active ownership capabilities are limited. Those funds’ managers control proxy-voting and company engagement activities for the target-date series and the firm’s model portfolios. Natixis Solutions collaborates with investor coalitions such as CERES, ICCR, and As You Sow, but this doesn’t stand out next to more advocacy-oriented firms. Natixis Investment Managers seeks to improve cohesion and clarity around the ESG practices of underlying affiliates, but it is unlikely to mandate firmwide adherence to a central ESG policy. Moreover, NIM’s ESG leadership has seen turnover: Harald Walkate, who led the ESG effort since 2019, left the firm in 2021 and was replaced by Nathalie Wallace. It will take time for this team to drive material improvement in the ESG practices of underlying affiliates.