Increasing demand for ESG factors across broader range of asset classes including sovereign debt ESG strategies are set to grow over the next 10 years: AXA Environmental, social and governance (ESG) strategies are set to grow over the next 10 years fuelled by impact investing, an increased focus on board diversity strategies and the use of ESG factors across a broader range of asset classes such as sovereign debt. This is according to leading global investment manager AXA Investment Managers. Paris-based Matt Christensen, Global Head of Responsible Investment for AXA IM, who is in Australia this week addressing the Australian Superannuation Investment conference on the future of ESG said: “ESG has been firmly on the investment agenda for the past decade and is one of the fastest growing global investment trends. We feel it’s time to forecast the next ten years to ensure we have the right tools in place to support demand for ‘ESG 2020’.” Impact investing in particular is starting to catch the attention of sizeable funds both globally and in Australia. AXA IM believes this is only set to increase with the impact investing market predicted to grow to US$500 billion by 2019 or 1% of global assets. [1]. “Broadly speaking, impact investing is defined as investments in businesses and/or funds that generate social and/or environmental benefit in addition to financial return – it can be viewed as a complement to the limits of traditional philanthropy and government programs. The market is still young but its growth has resulted in initiatives that enhance its credibility such as the setting up of standards such as IRIS (Impact Reporting and Investment Standards) or labels such as GIIRS (Global Impact Investing Rating System),” he said. Supporting another growing trend, AXA IM recently developed a strategy that applies ESG metrics to assess countries’ creditworthiness, risks and opportunities in sovereign debt portfolios. “Until a few years ago it was rare for investors to consider ESG factors for asset classes beyond equity and corporate fixed income. We’re seeing increasing interest in ESG analysis being applied to asset classes such as sovereign debt. This attention to ESG has only been amplified by the euro zone crisis, which brought the evaluation of sovereign issuers’ creditworthiness to the fore. We are already using this ESG country framework in our core RI funds but we also see an opportunity to expand this to mainstream funds over the coming years,” said Mr Christensen. A final trend AXA IM predicts will grow rapidly in coming years is board diversity. Despite some of the largest European and Australian corporations being truly international enterprises, the impacts of globalization remain to be fully seen at the board level. AXA IM believes the rapid rise of emerging economies will continue to springboard diversity at the forefront of the corporate governance agenda, both now and in the future. “Up to the present time, diversity has largely been focused on gender balance as research points a link between gender diversity at a board level and a company’s financial performance. However we believe, and research now shows, that other aspects such as nationality can also increasingly be seen as a means to bring a broader range of views and experiences to bear within the leadership of companies across the globe. We recently analysed board diversity among the largest 50 European companies by market cap. The results suggest companies need to bolster senior management boards by shaping their composition in a way that better improves their readiness for success in emerging markets – I imagine this would have a similar outcome among ASX listed companies,” he said. AXA IM strengthens RI capabilitiesA responsible investor since 2001, AXA IM’s goal is to integrate ESG factors across the spectrum of its A$703 billion multi-asset investment capabilities. Over the next ten years the firm plans to further expand its global RI research capabilities. Craig Hurt, Sydney-based Director of AXA Investment Managers in Australia and New Zealand, said “Through the ongoing expansion of our global RI research and initiatives, we aim to offer Australian institutional investors – and their individual members and investors – a wider opportunity to invest in strategies incorporating ESG principles.” ————- [1] Monitor Institute:2009 |
