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AXA Investment Managers

PRI reporting framework 2020

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You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (C) Implementation: Integration of ESG factors

(C) Implementation: Integration of ESG factors

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate the proportion of actively managed listed equity portfolios where E, S and G factors are systematically researched as part of your investment analysis.

ESG issues

Proportion impacted by analysis




Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

AXA IM is committed to integrating ESG across asset classes, and Financial Analysts and Portfolio Managers are responsible for conducting corporate ESG analyses as part of their assessment of a counterpart..

In that perspective, they rely on the proprietary internal scores, as well as internal and external research, and are able to focus on ESG issues that are most relevant and material for their analysis. This follows an internal framework integrating all 3 ESG pillars through 6 factors (board oversight& control, management quality & incentives, human capital management, business behaviour, resource efficiency and environmental impacts) and then 13 sub-factors. Based on this framework, Financial Analysts and Portfolio Managers can put more or less weight to certain ESG factors depending on the relevance/materiality to the company/industry. This framework for analysis is also translated into various weights between E, S and G factors depending on the sector in the scoring model.

Please refer to LEI 01.2 for detailed description on the ESG integration approach for Framlington Equities and Rosenberg Equities

LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on robust analysis.

09.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your integration strategy.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

09.6. Additional information. [Optional]

ESG research produced in-house are communicated to portfolio managers through four different means:

1. Quantitative:

A proprietary scoring methodology is in place for corporates and sovereign assets, focusing on a more discriminating relative score, titled towards impact and materiality with greater emphasis upon controversies. Fund Managers and Financial Analysts have access to the ESG scores computed twice a year.

In addition, AXA IM has made available in the front office tools, and will continue to extend in 2019, a range of extra-financial data and analysis on ESG factors across asset classes and thus enables its portfolio managers to incorporate ESG criteria into their investment decisions. 

2. Qualitative:

Access to several ESG research providers has been extended to investment teams in 2018 (e.g. MSCI ESG, Oekom Sustainability, Vigeo, Sustainalytics).

3. Trainings: In the context of ESG integration, Financial Analysts and Portfolio Managers are now responsible for conducting corporate ESG analyses, and additional resources were recruited in 2018 within most investment platforms to support these efforts. The RI Team is currently training those later on ESG issues per sector and still support them when analyzing companies from an ESG point of view. Thematic training is also available (e.g. engagement, etc.).  

LEI 10. Aspects of analysis ESG information is integrated into

New selection options have been added to this indicator. Please review your prefilled responses carefully.

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.2. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis.

          Other adjustments include an adjustment to forward-looking risk at the portfolio and asset level

10.3. Describe how you integrate ESG information into portfolio weighting.

Rosenberg Equities uses a systematic approach to portfolio construction in which traditional alpha measures, traditional risk measures, and ESG information are used in portfolio optimization.  In this part of portfolio construction we look to maximize predicted risk adjusted return and improve ESG profile.  While there are some examples of stocks we will not invest in for ESG reasons (e.g. tobacco, severe controversy names), our process is not divestment-centric.  We prefer, instead, to let the ESG Score of any company influence how over- or underweight we will be in an individual position.

Framlington equities: Individual stock positions are sized on a return/risk basis, taking into account valuation upside, the market outlook, ESG profile and internal portfolio construction guidelines. We also maintain a strict sell discipline that includes triggers such as a stock meeting its valuation target and changes in the competitive environment, strategy or business model of a company. As we regularly monitor the eligible investment universe, we can also choose to sell a position when a better opportunity arises elsewhere.  Material changes to the observed ESG characteristics of a company in terms of risks or opportunities may contribute to changes in portfolio weightings or holdings.

10.4. Describe the methods you have used to adjust the income forecast/valuation tool.

At Rosenberg, we have several proprietary stock selection models including models that are focused on earnings quality (stability and magnitude of future earnings).  We have added diversity measures to this model as we’ve found that, among the most profitable firms, those with greater board diversity appear better able to preserve that profitability in the coming year.   Separately, an initiative for us in 2019 is to formally add carbon footprint into our valuation model.  Testing this model in preparation for this formal addition has resulted in an observed penalty on valuation when carbon footprint is modelled as a company expense.

10.6. Additional information. [OPTIONAL]

At Rosenberg Equities, we are interested in understanding the links between ESG criteria and fundamental drivers of risk and return within the public equity market. Our ESG research initiatives are focused on this type of fundamental analysis with the objective of improving the risk and return of our clients’ portfolios through robust ESG integration.  In the past year we have expanded our view of ESG to include ‘impact’ ideas within listed equities.  By doing this we can go beyond a company’s operational profile to also include products and services that a company makes (as proxied by revenue analysis).  We use this information to further up-weight or down-weight (or exclude) companies for our strategies that have an explicit UNSDG-aligned commitment.