AXA IM: Climate actions strengthened to accelerate contribution to a low-carbon world

Nov 8, 2021

AXA Investment Managers (AXA IM) today announces enhanced climate commitments aimed at accelerating its contribution to the transition towards a more sustainable and less carbon-intensive world.

“We must all play our part in the transition to a low-carbon world and we are proud to announce these updates to our climate commitments during the World Climate Summit, the Investment COP. As active asset managers, the way we act on our convictions and allocate capital has the power to influence investee companies’ behaviours. Our fiduciary duty goes beyond delivering returns to our clients, it’s also about investing responsibly and driving climate action. This is how AXA IM plays its part. In our investment decisions, in the products we offer, in the way we engage and vote, and in the way we manage our own business – we act to balance returns with the long-term sustainability of the world we live in.”, said Marco Morelli, Executive Chairman of AXA IM.

Reinforced climate engagement and stewardship policy

“We fundamentally believe we must allocate even more capital to climate solutions and net zero aligned assets and continue to finance companies which we believe are truly transitioning. Engagement and open dialogue with companies and clients are crucial to understanding and influencing the net zero trajectories. Also, if we don’t see progress and strong commitments from companies, we need to be brave and bold in our investment decisions and be ready to divest. The road to net zero is all about transition. We must give companies the time to adjust but we must also adopt a no-compromise approach with investee companies that don’t take climate change seriously”, added Marco Morelli.

From 2022, AXA IM will apply a stronger climate lens to its investment decisions and will adopt four different approaches when looking at high impact companies and issuers depending on the category they fall in:

• “Climate leaders” are companies that provide climate solutions enabling the transition to a 1.5°c world and/or already have a low carbon footprint and best in class climate and environmental practices. AXA IM will continue to invest in “climate leaders” and ensure they maintain their leadership. “Transition leaders” are companies with a good carbon reduction track record and/or a formal improvement path with measurable objectives. AXA IM will continue to work hard to identify those “transition leaders” that present a growth opportunity thus providing long term value for clients.
• “Transition laggards” are companies that are climate aware but are slower to embark on a tangible transition journey. AXA IM will continue to invest and engage with “transition laggards” in order to encourage them to accelerate their transition, notably through votes at Annual General Meetings (AGMs).
• “Climate laggards” are companies that are not taking climate change seriously according to AXA IM. This focused list will be defined by AXA IM and composed of companies that are material in AXA IM’s portfolios and whose impact on climate is also high. AXA IM will engage with these companies from 2022 defining clear objectives, monitor actions taken until 2025 and divesting if progress on their net zero path is not substantial, thereby applying a “three strikes and you’re out” principle. Of the capital to be potentially divested from climate laggards, AXA IM will look to invest in climate and transition leaders.

Strengthened investment policy on the Oil & Gas sector, with new exclusions

To mitigate the adverse impacts of the industry on the environment, AXA IM will strengthen its Oil & Gas (O&G) policy as follows:

New exclusions on Unconventional Oil & Gas

• Reinforcement of the Oil Sands policy by adding an absolute exclusion threshold, leading to the exclusion of companies for which Oil Sands represents more than 5% of total production.
• Extension of the environmental focus through the adoption of a strict policy on Arctic by excluding Oil & Gas extraction activities carried out in the Artic Monitoring and Assessment Programme (AMAP) region. This will mean divesting from companies that are deriving more than 10% of their production from this region. On Shale/Fracking, AXA IM will exclude small players with above 30% production exposure.
• These new restrictions are part of AXA IM’s ESG Standards and will be implemented early 2022.

Engagement

• AXA IM will engage with O&G companies which remain in scope based on clear objectives and a specific timeframe and will divest after three years if sufficient progress has not been achieved.
• The Science Based Targets initiative (SBTi) framework for the Oil & Gas sector is expected to be released by year-end 2021, and AXA IM will focus on ensuring O&G players which remain in scope set science-based targets in line with this new framework in a timely manner.

Reinforced attention on Unconventional and Conventional Oil & Gas

• Systematic focus on operational practices to ensure methane management is correctly handled and CO2 KPIs are in line with expectations.

Investing in Climate solutions to foster the transition to a 1.5°C world

Allocating capital to climate-friendly solutions to foster long-term sustainability and performance requires transparency on goals and intention of strategies.

AXA IM has committed to the following to encourage the channelling of capital to those solutions:

• Further develop the ACT fund range (its most focused ESG funds) to simplify its offer for distributors and end-investors. The ACT range encompasses recently launched ESG funds which target specific sustainability goals around issues such as climate change.
• Ensure more eligible funds and strategies launched within Equities, Fixed Income and Multi-Asset – representing the majority of assets managed by AXA IM – fall into Articles 8 and 9 of the Sustainable Finance Disclosure Regulation (SFDR), the most demanding and stringent of the EU regulatory disclosures for sustainable investment funds.
• Continue to invest in green assets to help finance the transition to a low-carbon world. Green investments, comprising of impact bonds, Green Listed Equity and Green Real Assets represented more than € 32.7 billion at end June 2021.
• Reduce CO2 emissions of direct real estate per square meter by 20% by 2025 vs 2019, with net zero objective by 2050.
• Have 50% of direct real estate assets aligned with 1.5°C by 2025.

Additionally, AXA IM, Blue Like an Orange and Proparco (a subsidiary of Agence Française de Développement focused on private sector development) are working on an innovative investment strategy to mobilize between USD 1 billion and 2 billion with development financial institutions, large private investors and insurers. This fixed income strategy would invest in Emerging Market bonds and would aim at providing support to the issuers for developing projects enhancing the UN Sustainable Development Goals (“SDGs”).

Becoming a net zero company by 2050             

AXA IM has taken a series of steps to address its own carbon footprint to be a net zero business by 2050. The business will:

• Measure consumption and become carbon neutral, through identification of current carbon footprint and offsetting.
• Reduce consumption to move towards net zero with an already set target to reduce CO2 emissions by 25% by 2025 vs 2019.
• Compensate for remaining consumption through offsetting solutions to remove carbon, leveraging ClimateSeed’s know how.

Further information on these commitments will be announced in 2022.

AXA IM has also taken the following actions to contribute to the transition to a low carbon world:

• Exit all coal investments in OECD countries by 2030, and throughout the rest of the world by 2040.
• Making its product range greener, including the launch of new carbon-focused strategies, further expanding a portfolio of green investments and the creation of an “ACT” family of funds to categorise its most focused ESG funds to help clients easily identify these funds and be clear on the criteria.
• 41% of AXA IM’s eligible assets are already on course to reach net zero in 2050 or sooner, with the aim to continue to grow the proportion of net zero assets under management (AUM) in 2022. By 2030, the CO2 footprint of these assets should have decreased by 50% compared to 2019.
• Publication of a yearly TCFD report since 2019, presenting the ESG and climate strategies, as well as key metrics, such as the carbon footprint of investments which decreased by -8% between 2018 and 2020.
• Engaged with 319 companies in 2020, with 27% of those engagements related to climate change and 18% related to resources and ecosystems.
• Working in tandem with AXA to assess methodology for Paris-aligned investing and define achievable targets: AXA Group has committed in 2020 to a 20% reduction in CO2 emissions from applicable investments, between 2019 and 2025. This target is revised regularly in line with the Net Zero Asset Owner Alliance (NZAOA) protocol.
• Awarded the first AXA IM Climate Transition Award to Dr. Floor van der Hilst for her research on “Sustainability of Bioenergy”. She was granted €100,000 in recognition of the significant impact of her work which focusses on land-use change dynamics resulting from biomass production.