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AXA Investment Managers

PRI reporting framework 2020

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Organisational Overview
Basic information [OO 01 - 09] Asset class implementation gateway indicators [OO 10 - 12] Peering questions [OO LE 01 - HF 01]
Strategy and Governance
Investment policy [SG 01 - 04] Objectives and strategies [SG 05 - 06] Governance and human resources [SG 07 - 08] Promoting responsible investment [SG 09 - 11] Outsourcing to fiduciary managers and investment consultants [SG 12] ESG issues in asset allocation [SG 13 - 15] Asset class implementation not reported in other modules [SG 16 - 17] Innovation [SG 18] Communication [SG 19]
Direct - Listed Equity Incorporation
ESG incorporation in actively managed listed equities [LEI 01 - 10] Implementation processes [LEI 01 - 10] (A) Implementation: Screening [LEI 04 - 06] (B) Implementation: Thematic [LEI 07] (C) Implementation: Integration of ESG factors [LEI 08 - 10] Outputs and outcomes [LEI 12 - 13]
Direct - Listed Equity Active Ownership
Overview [LEA 01] Engagement [LEA 02 - 08] Outputs and outcomes [LEA 09 - 11] (Proxy) voting and shareholder resolutions [LEA 12 - 21]
Direct - Fixed Income
ESG incorporation in actively managed fixed income [FI 01 - 12] Implementation processes [FI 01 - 03] (A) Implementation: Screening [FI 04 - 06] (B) Implementation: Thematic [FI 07 - 09] (C) Implementation: Integration [FI 10 - 12] Fixed income - Engagement [FI 14 - 16] Outputs and outcomes [FI 17 - 18]
Direct - Property
Overview [PR 01] Fundraising of property funds [PR 02 - 03] Pre-investment (selection) [PR 04 - 06] Selection, appointment and monitoring third-party property managers [PR 07] Post-investment (monitoring and active ownership) [PR 08 - 14] Overview [PR 08] Property monitoring and management [PR 09 - 10] Property developments and major renovations [PR 11] Occupier engagement [PR 12 - 13] Community engagement [PR 14] Outputs and outcomes [PR 15 - 16]
Direct - Infrastructure
Overview [INF 01 - 02] Fundraising of infrastructure funds [INF 03 - 04] Pre-Investment (Selection) [INF 05 - 09] Post-investment (monitoring and active ownership) [INF 11 - 16] Overview [INF 11] Infrastructure Monitoring and Operations [INF 12 - 14] Infrastructure Maintenance [INF 15] Outputs and outcomes [INF 17 - 18] Communication [INF 19]
Confidence building measures
Confidence building measures [CM1 01 - 07]
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You are in Strategy and Governance » ESG issues in asset allocation

ESG issues in asset allocation

SG 13. ESG issues in strategic asset allocation

13.1. Indicate whether the organisation carries out scenario analysis and/or modelling, and if it does, provide a description of the scenario analysis (by asset class, sector, strategic asset allocation, etc.).

Describe We have spent the past year studying climate scenario analysis. We have focused on an approach which tests the alignment of investment portfolios to future global warming outcomes. We published a research paper where we detail the thinking we have developed around this specific scenario analysis approach: https://realassets.axa-im.com/content/-/asset_publisher/x7LvZDsY05WX/content/climate-scenario-analysis-assessing-the-future-for-investments/23818.

13.2. Indicate if your organisation considers ESG issues in strategic asset allocation and/or allocation of assets between sectors or geographic markets.

We do the following

13.3. Additional information. [OPTIONAL]

To support our scenario analysis, we use Value at Risk for transition risks and opportunities exposure assessment but also a more holistic modelling approach used by Carbon Delta ( warming potential). It combines both top-down and bottom-up data based on a macroeconomic definition of carbon budgets (corresponding to different global warming scenarios and that Carbon Delta retrieves from annual UNEP Gap report), which are then allocated by company according to the sectoral and geographical structure of its assets or revenues. This allocation process consists in defining temperature curves for each company. A notion of green technological innovation is considered to project the future carbon intensities of companies in the medium term. The underlying temperature is inferred by comparing future intensities to different warming curves. Carbon Delta offers two temperature levels:

A specific sector temperature where the company is compared to its main sectors of activity (sector carbon budgets);
And, an agnostic sector temperature where the company is compared to the universe as a whole (universe carbon budgets).

This temperature measurement is at the heart of the AXA Group’s climate strategy and communications. AXA would align its investments with a global warming scenario of 1.5°C, in line with the Paris Agreement.

SG 13 CC.

13.4 CC. Describe how your organisation is using scenario analysis to manage climate-related risks and opportunities, including how the analysis has been interpreted, its results, and any future plans.

Describe

We are working with Carbon Delta MSCI, we use indicators such as investment temperature, Value at Risk Transition or Physical Risks to perform the analysis of climate issues from a financial point of view. For now, scenario analysis is used from a resilience perspective, where we assess ex post in our TCFD reporting the sensitivity of our assets’ value to various possible climate future (1.5°c, 2°c and 3°c)

Describe

In the context of the Climate Taskforce, we have set up portfolio alignment principles which are splitting the universe according to various categories of issuers depending on their level of alignment with Paris Goals and greenness. Alignment and greenness are measured combining historical and forward looking scientifically based metrics. These criteria are not limited to quantitative measures we also consider deep qualitative assessment based on engagement and dialogue with issuers.

Describe

We publish on an annual basis our Article 173 - TCFD combined report. This report describes AXA IM’s responsible investment initiatives. Its intention is two-fold: to comply with mandatory disclosure requirements related to the French “Article 173 VI” decree and to adhere to the voluntary disclosure recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). Each requires disclosure on separate yet complimentary aspects of sustainability and how these are systematically integrated into our investment processes. The TCFD focuses on climate-related risks and opportunities, while Article 173 pertains to Environmental, Social and Governance (ESG) considerations in addition to climate. To satisfy both, this report follows the TCFD structure, namely 1) Governance, 2) Strategy, 3) Risk Management, and 4) Metrics & Targets, and adheres to the TCFD’s general guidance for the financial sector and supplemental guidance for insurance companies and asset owners. Each section addresses ESG and climate in parallel with separate commentary for investment and insurance activities. For Metrics & Targets, proofs of concept on climate related KPIs have been performed on the basis of AXA Group’s investments which represent 59% of AXA IM’s total assets under management2 . Climate risks & opportunities metrics as well as warming potential simulations have been performed for AXA Group TCFD-Article 173 report, available on www.axa.com.

13.5 CC. Indicate who uses this analysis.

13.6 CC. Indicate whether your organisation has evaluated the potential impact of climate-related risks, beyond the investment time horizon, on its investment strategy.

Describe

We have started to run first tests of asset allocation shifts induced by the integration of climate objectives. These tests consist in getting a longer term perspective of what would be the implications for our portfolio of various climate futures.

To support this deeper analysis, in 2019, we launched, in collaboration with AXA Research Fund,  a three-year academic research program on the Strategic Asset Allocation and climate objectives topic. In particular, the question of whether climate risks may shape the traditional financial risks is studied.

In 2019 we also published a paper on scenario analysis, based on the work done for the assets we manage :  https://realassets.axa-im.com/content/-/asset_publisher/x7LvZDsY05WX/content/climate-scenario-analysis-assessing-the-future-for-investments/23818

13.7 CC. Indicate whether a range of climate scenarios is used.

13.8 CC. Indicate the climate scenarios your organisation uses.

Provider
Scenario used
IEA
IEA
IEA
IEA
IEA
IRENA
Greenpeace
Institute for Sustainable Development
Bloomberg
IPCC
IPCC
IPCC
IPCC
Other

Other (1) please specify: 

          Postdam Institute (PIK model)
Other

Other (2) please specify: 

          IAM scenarios
Other

SG 14. Long term investment risks and opportunity

14.1. Some investment risks and opportunities arise as a result of long term trends. Indicate which of the following are considered.

14.2. Indicate which of the following activities you have undertaken to respond to climate change risk and opportunity

Specify the AUM invested in low carbon and climate resilient portfolios, funds, strategies or asset classes.

Total AUM
trillions billions millions thousands hundreds
Currency
Assets in USD
trillions billions millions thousands hundreds

Specify the framework or taxonomy used.

In that amount, we include our investments in Green Bonds (€6bn) and Real Assets (€10bn), both EU taxonomy certified

other description 

          Three-year research program on Strategic Asset Allocation and Climate Objectives in collaboration with the Universities of Tillburg (Netherlands) and Lyon I (France)

14.3. Indicate which of the following tools the organisation uses to manage climate-related risks and opportunities.

other description 

          capital expansion plan, energy mix, tar sands exposure

14.4. If you selected disclosure on emissions risks, list any specific climate related disclosure tools or frameworks that you used.

In order to enable our clients to measure the integration of ESG criteria into the funds and to communicate in a clear and transparent manner, AXA IM has taken the initiative to display two ESG metrics (i.e. indicators) in the standard reporting of all our funds. The ESG score (absolute and relative) and the Carbon Footprint (CO2 relative intensity) are integrated into these reports since January 2019.In addition, starting in 2019, we have disclosed a number of forward-looking climate-related KPIs in our TCFD report, to measure AXA IM exposure to climate risks and opportunities, as a company.

14.5. Additional information [Optional]

We use Trucost as a provider for emissions and reserves database. Moreover, thanks to new partnerships with climate Fintech, Carbon Delta, and credit rating agency, Beyond Ratings, AXA IM is rolling-out measurement and reporting on the alignment of its strategies with various warming scenarios. The first results of this analysis were disclosed in our 2019 TCFD report.

SG 14 CC.

14.6 CC. Provide further details on the key metric(s) used to assess climate-related risks and opportunities.

Metric Type
Coverage
Purpose
Metric Unit
Metric Methodology
Climate-related targets 
          Warming potential of investments
        
          Degree Celsius
        
          Various temperature carbon budgets’ apportioning at company level
Weighted average carbon intensity 
          See Portfolio carbon footprint
        
          See
Portfolio
Carbon footprint
        
          See
Portfolio
Carbon footprint
Carbon footprint (scope 1 and 2) 
          Measure absolut carbon emissions of companies
        
          Tonnes CO2
        
          Scope 1 + Scope 2 electricity
Portfolio carbon footprint 
          Measure carbon historical performance of the portfolio compared to the benchmark
        
          Tonnes CO2/mns $ revenues
        
          Asset Weighted average of companies Carbon intensities (Scope 1 + Scope 2 electricity + scope 3 business air travel CO2 emissions/mns $ revenues)
Carbon intensity 
          Measure carbon historical performance of companies
        
          Tonnes CO2/ mns $ revenues
        
          Scope 1 + Scope 2 electricity + scope 3 business air travel CO2 emissions/mns $ revenues
Exposure to carbon-related assets 
          Mitigate stranded assets risks and set up AXA IM climate risks exclusion list
        
          % of assets exposed to climate risks list
        
          •	% revenues and power mix to thermal coal
•	Thermal coal production
•	Coal capacity extansion
•	% revenues to Tar sands

14.7 CC. Describe in further detail the key targets.

Target type
Baseline year
Target year
Description
Attachments 
          2019
        
          2050
        
          This corresponds to the target year for AXA in the context of the Net Zero Asset Owner Alliance

14.8 CC. Indicate whether climate-related risks are integrated into overall risk management and explain the risk management processes used for identifying, assessing and managing climate-related risks.

Please describe

14.9 CC. Indicate whether your organisation, and/or external investment manager or service providers acting on your behalf, undertake active ownership activities to encourage TCFD adoption.

Please describe

We align our engagement objectives with the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD). We use the TCFD framework as the basis of our engagement with companies, as this broadens climate stewardship beyond emitters to other sectors where climate change equally poses a financial risk. One

AXA IM has been involved in the Climate Action 100+ initiative since its launched in 2017 as both lead and collaborative investor and is active in various initiatives led by IIGCC. In particular, we are constantly looking at resolutions working group proposals to implement in concrete manner the recommendations of the TCFD for most laggards companies on climate issues.

In addition to this collaborative initiative, we have set up engagement sector working groups on climate topics where we identify along with portfolio managers analysts and sector experts the most critical and material metrics on which we systematically challenge companies.

In addition to this collaborative initiative, we have launched other climate related thematic engagement projects. One consists in engaging with Oil & Gas state owned companies which own more than 50% of fossil fuels reserves globally. We have also started an engagement project with small & mid-caps companies in end-use demand sectors.

SG 15. Allocation of assets to environmental and social themed areas

15.1. Indicate if your organisation allocates assets to, or manages, funds based on specific environmental and social themed areas.

15.2. Indicate the percentage of your total AUM invested in environmental and social themed areas.

1 %

15.3. Specify which thematic area(s) you invest in, indicate the percentage of your AUM in the particular asset class and provide a brief description.

Area

Asset class invested

0.14 Percentage of AUM (+/-5%) per asset class invested in the area
1 Percentage of AUM (+/-5%) per asset class invested in the area
12 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

AXA IM launched early 2019 a Clean Tech equity strategy which aims to deliver long-term financial performance by investing in companies operating across the clean economy that develop activities which allow the energy transition and resource optimization. The strategy offers measurable clean economy indicators (CO2 emissions, water intensity, etc.) and tackles some of the sub goals of UN SDGs.

The AXA WF Global Green Fund harnesses the rapidly growing Green Bond universe, investing in environmental projects that facilitate the transition to a low carbon economy.

We launched an Impact fund focused on Climate and Biodiversity in 2019. One of its focus is on resource efficiency and sustainable solutions. To combat climate change and the depletion of natural resources, the world needs to create new solutions which reduce or prevent emissions of greenhouse gases and promote resource efficiency. Under this theme we invest in multi-dimensional solutions, technologies and innovations. These range from providing access to clean energy for underserved communities, to reducing reliance on carbon intensive sources of energy that are damaging to the environment. They also promote energy efficient products and circular economy solutions that break the traditional linear approach of a ‘take, make, dispose’ model of production.

Asset class invested

0.14 Percentage of AUM (+/-5%) per asset class invested in the area
1 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

AXA IM launched early 2019 a Clean Tech equity strategy which aims to deliver long-term financial performance by investing in companies operating across the clean economy that develop activities which allow the energy transition and resource optimization. The strategy offers measurable clean economy indicators (CO2 emissions, water intensity, etc.) and tackles some of the sub goals of UN SDGs.

The AXA WF Global Green Fund harnesses the rapidly growing Green Bond universe, investing in environmental projects that facilitate the transition to a low carbon economy.

Asset class invested

1 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

The AXA WF Global Green Fund harnesses the rapidly growing Green Bond universe, investing in environmental projects that facilitate the transition to a low carbon economy.

Asset class invested

0.18 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Sustainable land use project financing in EM in partnership with Althelia Ecosphere

Asset class invested

0.14 Percentage of AUM (+/-5%) per asset class invested in the area
0.18 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Sustainable land use project financing in EM in partnership with Althelia Ecosphere

AXA IM launched early 2019 a Clean Tech equity strategy which aims to deliver long-term financial performance by investing in companies operating across the clean economy that develop activities which allow the energy transition and resource optimization. The strategy will offer measurable clean economy indicators (CO2 emissions, water intensity, etc.) and tackles some of the sub goals of UN SDGs.

Asset class invested

0.16 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

We provide capital to microfinance funds that ultimately provide loans to individuals and microbusinesses, supporting financial inclusion.

In 2019, a fourth PE Impact fund was launched. The new strategy, which is seeking to raise between $300-$400 million, will invest in private companies focusing on creating intentional impact outcomes across scalable impact themes such as access to healthcare and financial inclusion. Within healthcare this will include the physical delivery of care through improved access to drugs and vaccines, whereas financial inclusion prioritises making financial services accessible and available to a previously under-served beneficiary group.

Asset class invested

0.76 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Supporting SME in emerging markets with a clear focus on BoP markets. We provide capital to microfinance funds that ultimately provide loans to individuals and microbusinesses, supporting financial inclusion.

Asset class invested

0.76 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

In 2019, a fourth PE Impact fund was launched. The new strategy, which is seeking to raise between $300-$400 million, will invest in private companies focusing on creating intentional impact outcomes across scalable impact themes such as access to healthcare and financial inclusion. Within healthcare this will include the physical delivery of care through improved access to drugs and vaccines, whereas financial inclusion prioritises making financial services accessible and available to a previously under-served beneficiary group

Asset class invested

0.18 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Investments in low cost private schools in emerging Markets via external fund managers. We are also contemplating investments in EdTech companies via other specialised asset managers.

Asset class invested

0.6 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

Covering a large spectrum of interventions in EM and DM from infrastructure financing (low cost hospitals…) to drugs / vaccines financing alongside strong impact players. In 2019, a fourth PE Impact fund was launched. The new strategy, which is seeking to raise between $300-$400 million, will invest in private companies focusing on creating intentional impact outcomes across scalable impact themes such as access to healthcare and financial inclusion. Within healthcare this will include the physical delivery of care through improved access to drugs and vaccines, whereas financial inclusion prioritises making financial services accessible and available to a previously under-served beneficiary group.

Asset class invested

0.14 Percentage of AUM (+/-5%) per asset class invested in the area
1 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

AXA IM launched early 2019  a Clean Tech equity strategy which aims to deliver long-term financial performance by investing in companies operating across the clean economy that develop activities which allow the energy transition and resource optimization. The strategy offers measurable clean economy indicators (CO2 emissions, water intensity, etc.) and tackles some of the sub goals of UN SDGs.

 
          women empowerment, human capital, Clean economy

Asset class invested

0.6 Percentage of AUM (+/-5%) per asset class invested in the area

Brief description and measures of investment

AXA IM launched a Clean Tech equity strategy which aims to deliver long-term financial performance by investing in companies

operating across the clean economy that develop activities which allow the energy transition and resource optimization. The strategy offers measurable clean economy indicators (CO2 emissions, water intensity, etc.) and tackles some of the sub goals of UN SDGs.

AXA WF Framlington Women Empowerment is one of the first truly global and actively-managed listed impact funds focussing on

gender diversity. The fund aims to deliver long-term financial performance and make a positive societal impact by investing in companies with good gender diversity practices and cultures and actively engaging with companies to maintain or improve these standards.

AXA WF Framlington Human Capital is managed according to an active and fundamental approach focusing on

well-run companies that comply with the basic rules of sustainable development. As such, the fund invests in companies:

-That demonstrate that they are aware of their social and environmental responsibilities;

-That have satisfactory social and environmental policies, management systems and results;

-That have a form of governance that is aligned with our voting and engagement policy.

We believe that human capital indicators can be leading performance indicators

15.4. Please attach any supporting information you wish to include. [OPTIONAL]


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