We see engagement as a proactive way of making sure that companies that we invest in or might invest in are developing a sustainable business model that will prove to be resilient in the short, medium and long term. This is done through both our Stewardship & Research team, driving engagement initiatives (individual or collective) at the company level, and our investment team when they meet with issuers.

In addition, we see engagement as a broader practice that can be conducted with all stakeholders, from companies to ESG external providers and market participants (such as DCM teams in Investment banks). We believe that is it crucial to foster new initiatives in the market, such as the development of transition bonds to support further climate transition.

Our approach to engagement with sovereign issuers is based on our belief that environmental, social and governance (ESG) issues have a significant impact on debt and growth sustainability, in line with the long-term interests of investors.

With this in mind, we aim to:

- Identify and understand the most critical ESG issues that affect each country in which we invest

- Evaluate a country's specific policies regarding these issues

- Raise these issues to Treasuries and aware them about the increasing importance of ESG for investors

We meet main sovereign issuers within de the developed countries universe each year. Meetings are naturally more frequent with European Treasuries (twice a year on average). These meetings are often the occasion to raise critical ESG issues, ongoing government projects on these topics, possible green and social bonds emissions, etc.

Engagement with bond issuers is an important aspect of our active ownership programme, as we are long-term investors and often hold bonds to maturity. Engaging on ESG issues is a critical way to ensure we manage the value of our bond investments over time.

Our engagement goals and activity

In 2019, we engaged with 36 bond-only issuers – that is, organisations that do not issue shares. Many of these engagements took place with green or social bond issuers. We held extensive discussions with issuers about commitment to a robust climate strategy and providing clear ongoing reporting on how a bond’s proceeds are used. We used the opportunity to discuss other thematic areas of interest to us – in particular biodiversity.

Separately, we published a call-to-action to establish Transition Bonds as a complementary asset class alongside green bonds.These are aimed at issuers from carbon-intensive industries who want to raise money to finance decarbonisation-related projects.

Results and next steps

Setting out our proposed guidelines for Transition Bonds led to the formation of a Climate Transition Finance Working Group under the auspices of the International Capital Market Association’s Green and Social Bond Principles, which will begin in 2020. We also worked with Credit Agricole Corporate and Investment Bank on the first Transition Bond aligned with our guidelines. We subscribed to this private placement on behalf of our parent entity AXA Group.

Fixed income issuers are more willing to engage with investors than ever before. Many now actively seek views on sustainability issues from their investor base and we consider the quality of engagement discussion to be generally of high quality. This is particularly so with green and social bond issuers who have made commitments and transparency on sustainability.

We prioritize and conduct our engagements with issuers based on our AXA IM’s thematic priorities, investment rational and clients priorities.

At AXA IM we believe investors can play a pivotal role in tackling these challenges. We are committed active and long-term investors, which underpins our role as responsible investors too. Our scale gives us influence – and our deep experience as investors in thousands of companies means we know to wield that influence with care. At the heart of this is our ambition to achieve a clear ‘win-win’ of improving risk-adjusted returns at the same time as contributing to broader societal and environmental objectives as defined in the United Nations Sustainable Development Goals (UN SDGs). For us, active ownership is about making the most of our rights as an investor to engage investee companies in productive dialogue that makes a tangible difference.

- We are proactive: We identify material ESG factors and strive to engage companies before concerns materialise and harm investors. We commit our efforts to those ESG themes which we consider to be the most strategically and financially material for long-term investors. These are climate change, biodiversity, human capital management, public health, data privacy and corporate governance.
- We are research-driven: As an active investment manager, we conduct in-depth analysis of companies as well as the broader macroeconomic backdrop and of ESG factors which shape investment outcomes. Our engagement and voting are built on the knowledge and insights we have developed.
- We create impact: Investors can drive impact in their investment activities by pressing for change at corporations – influencing the way they behave and do business. We focus our engagement where we believe it could have the greatest impact taking account of UN SDG targets.

- We are an industry leader: Taking a bold stance on difficult issues and committing resources to delivering engagement outcomes helps us reach our goals for clients and society in the long term. We also seek to work collaboratively with other investors to achieve shared objectives.

Engagement with bond issuers is an important aspect of our active ownership programme, as we are long-term investors and often hold bonds to maturity. Engaging on ESG issues is a critical way to ensure we manage the value of our bond investments over time.

Our engagement goals and activity

In 2019, we engaged with 36 bond-only issuers – that is, organisations that do not issue shares. Many of these engagements took place with green or social bond issuers. We held extensive discussions with issuers about commitment to a robust climate strategy and providing clear ongoing reporting on how a bond’s proceeds are used. We used the opportunity to discuss other thematic areas of interest to us – in particular biodiversity.

Separately, we published a call-to-action to establish Transition Bonds as a complementary asset class alongside green bonds.These are aimed at issuers from carbon-intensive industries who want to raise money to finance decarbonisation-related projects.

Results and next steps

Setting out our proposed guidelines for Transition Bonds led to the formation of a Climate Transition Finance Working Group under the auspices of the International Capital Market Association’s Green and Social Bond Principles, which will begin in 2020. We also worked with

Credit Agricole Corporate and Investment Bank on the first Transition Bond aligned with our guidelines. We subscribed to this private placement on behalf of our parent entity AXA Group.

Fixed income issuers are more willing to engage with investors than ever before. Many now actively seek views on sustainability issues from their investor base and we consider the quality of engagement discussion to be generally of high quality. This is particularly so with green and social bond issuers who have made commitments and transparency on sustainability.