Mirova green fund exits Philippine debt after corruption scandal
MIROVA SA鈥檚 flagship green bond fund exited its position in Philippine debt following a corruption scandal that raised concerns investors may have inadvertently financed flood-control projects now under investigation for graft.
The asset manager鈥檚 鈧1.4-billion ($1.6 billion) Global Green Bond Fund sold all of its holdings of Philippine sustainable bonds over the course of December and January, the latest company disclosures show. The position comprised less than 1% of its total assets, with the bulk of the fund鈥檚 investments in Europe.
A Mirova spokesperson declined to comment on the divestment. Bloomberg reported in November that the firm, a unit of French banking group BPCE SA, was among global investors reviewing its exposure as the scandal unfolded.聽
Philippine authorities have issued warrants for more than a dozen people in connection with the corruption scheme, including a former lawmaker. Prosecutors allege that as much as 70% of government funds allocated to flood-control projects may have been lost to misappropriation, with politicians receiving kickbacks through collusion with contractors.
Bond investors led by BNP Paribas Asset Management and Robeco Institutional Asset Management BV have called on the Philippines to impose stricter reporting standards for state-backed projects in the wake of the scandal, Bloomberg reported earlier this month.
The controversy has embroiled buyers of the $7 billion in sustainable bonds the country has issued since 2022 across US dollar, euro and yen markets. About 40% of those proceeds have been allocated to flood defenses, according to Bloomberg calculations based on government disclosures that don鈥檛 identify the specific projects financed.
National Treasurer Sharon Almanza didn鈥檛 respond to a request for comment.
Mirova, which is known as a specialist in sustainable fixed-income investing, launched one of the first global green bond funds in 2015.
Sustainable bonds are coveted by ESG investors because they finance projects that are supposed to do good. The market for that debt has mushroomed over the past decade, with green bond sales growing to a record $730 billion last year from less than $50 billion in 2015, according to Bloomberg Intelligence data. That鈥檚 on top of $281 billion of sustainability bonds, which also fund socially-beneficial spending.
Climate-vulnerable nations like the Philippines have attracted investors seeking environmental impact. But revelations that many flood-control projects are defective 鈥 and in some cases were never built 鈥 have sparked mass protests in a country highly exposed to extreme weather. Storms killed about 400 people and displaced more than 9.5 million last year.
The fallout is also weighing on the economy, denting business and consumer sentiment and delaying other government projects. Gross domestic product grew in the fourth quarter at its weakest pace in 14 years, excluding the sharp slowdown during the coronavirus pandemic. 鈥斅Bloomberg
