How to invest for a sustainable world?
At AXA IM, we believe in empowering our clients to invest in the transition to a more sustainable planet and society. We think asset managers can play a leading role in this transition by directing investment capital towards the businesses and projects creating solutions to some of the world’s greatest challenges, including climate change, biodiversity loss, demographic shifts, and ensuring fair and safe societies.
How does responsible investing help build a more sustainable world?
In our view, investing in companies and projects that are leading the way to a more resilient and equitable economy is a means to not only accelerate the transition to a more sustainable world but also make better investment decisions in terms of potential financial returns over the long-term.
With increasing regulation and growing awareness from governments and consumers, if companies don’t adapt their business models to meet demand for more sustainable practices, they risk failing. While the companies who not only understand their impact but invest in progress and deliver solutions can be best positioned for future growth. Hence we believe in wielding our influence as a leading asset manager to incentivise companies to engage in more responsible actions and behaviours.
Responsible Investing (“RI”) is a broad term that refers to a wide range of approaches that helps us in being an active partner for clients in the transition to this more sustainable and prosperous global economy.
In practice, RI involves:
- Environmental, Social and Governance (ESG) integration: Using ESG factors to enhance traditional financial analysis by identifying potential risks and opportunities.
- Exclusions: Rules that decide which areas a portfolio will not invest in, either for moral reasons or in an effort to avoid the highest potential ESG-related risks. For example, sectors like tobacco and controversial weapons.
- Impact investing: The focus on financing businesses and projects that are designed to have intentional, positive and measurable impacts on society. The objective is to balance financial returns and have a measurable impact on specific issues such as climate change.
- Sustainable investing: We define sustainable portfolios as those where sustainability criteria are central to the security selection and portfolio construction process. The objective is deliver financial performance while promoting sustainability.
How do we invest responsibly?
There are three common pillars to our RI approach incorporated across AXA IM Core fixed income, equity, and multi-asset portfolios.
- Framework for data and research: We integrate ESG in research and portfolio construction stages; seeking to generate robust quantitative data that can guide portfolio managers, while delivering qualitative research that digs into how ESG themes are affecting assets, sectors and regions.
- Exclusions: We apply both firm-wide minimum sectorial policies and AXA IM Standards which exclude non ESG-compliant exposures.
- Active ownership: We are proactive with our engagement and voting to identify potential ESG risks before they materialise.
Since ESG is already embedded into our investment processes across our equity, fixed income and multi asset, as of December 2021, c.85% of our funds and strategies within AXA IM Core fall under Articles 8 and 9 of the EU’s Sustainable Finance Disclosure Regulation (SFDR),1 meaning they meet the most demanding and stringent of the EU regulatory disclosures for sustainable investment funds.
- Excludes non applicable assets (assets that are managed outside the EU and therefore not in scope of the regulation). The product categorization is provided based on the basis of the European Directive (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (“SFDR Regulation”). The attention of each recipient is drawn to the fact that, as of today the SFDR related regulatory technical standards (“RTS”) have not been finalized and remain subject to the approval and formal adoption by the European Commission and the European Parliament and Council. Furthermore, there may be further guidance in relation to the interpretation of the SFDR Regulation. We are monitoring regulatory developments closely, and the product categorization shall be re-assessed and may evolve when the RTS and/or further guidance is published.
Our ACT range is at the forefront of responsible investing at AXA IM Core and consists of strategies that meet the requirements of the Article 9 of the SFDR regulation. The strategies here are designed to help clients target specific sustainability goals around people and the planet, such as inequality and climate change.