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CHAPTER 3

ESG Integration

4 min read June 17, 2020
ESG Integration

MIM has always integrated environmental, social, and governance (ESG) factors in our investment decision-making processes, as outlined in our ESG Investment Policy.

We believe material ESG factors have an impact on investment performance and therefore are a critical part of risk management, which is ingrained in MIM’s culture and integrated throughout our organization. When assessing the relevant risks associated with any investment opportunity, we conduct bottom-up fundamental research and focus on multiple factors. These considerations are a vital part of our due diligence, as we seek to identify issues that may impact the reputation of a borrower or company, as well its financial condition, credit rating, and transaction pricing.

Increased transparency

In 2019, MIM revised and expanded its ESG Investment Policy and issued supplemental policies for multiple asset classes — including commercial and equity real estate, and agricultural lending — to create more transparency around our processes.

Enhanced governance and oversight

MIM also launched an ESG Integration Council (the Council) with representatives from all MIM asset sectors1 and support functions to better coordinate and integrate policies and practices internally, as well as to facilitate sharing of best practices, knowledge, and expertise.

The Council meets bimonthly and is hosted by MIM’s Sustainable Investment Strategies (SIS) team, which is responsible for the development, implementation, and oversight of MIM’s sustainable investment strategy. The SIS team ensures that MIM’s asset originators, portfolio managers, and credit analysts implement MIM’s responsible investing practices and adhere to the ESG Investment Policy. This cross-functional Council will facilitate our ability to meet the commitments MIM has made as a signatory to the Principles for Responsible Investment (PRI).

Invenergy Grand Ridge Wind Energy Center. MIM-managed renewable energy investment.

Active engagement

The MIM team actively engages with company leadership to manage investment risk, with investment analysts frequently interacting with senior management throughout the initial due diligence process and as part of the portfolio monitoring process. Ongoing dialogue also helps raise awareness of sustainable business practices.

Sustainable agriculture

ESG integration has always been a part of MIM’s disciplined risk management culture. Specific to agricultural lending, we recognize that rapid climate change and related environmental impacts can pose risks for our agricultural loans. As part of our ongoing efforts to continually strengthen our risk assessment and management processes, MIM entered into an agreement with AQUAOSO, a water risk software system, in 2019 to better ensure the sustainability of the loans we provide in California. The software allows us greater insight into the risks associated with borrowers’ land and land practices by providing on-demand research and custom reports based on proprietary and public data.

At the end of 2019, MIM’s responsible investments under management totaled ~$58 billion.

Fair labor practice screening

As an example of MIM’s commercial real estate lending ESG integration efforts, where possible we vet prospective borrowers’ labor practices, including hiring procedures, sourcing and safety protocols related to human and labor rights, and confirm compliance with immigration laws and requirements. Labor violations and human rights abuses can pose significant risks to our investments, and MIM works hard to regularly assess and mitigate these risks. Our local loan originators, along with their on-the-ground network and experience, play a critical role in helping us prioritize borrowers with strong, positive reputations for maintaining fair labor relations and human rights.

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1 See Value Creation for a list of all MIM asset sectors.