Celebrating its tenth year, the FEIA is a joint initiative by the AFA and TAL, that recognises women in financial advice who are making a significant contribution to their profession, their community and their clients.

The FEIA Award 2022 finalists are:

• Amie Baker – Rekab Advice
• Kathy Havers – Viridian Advisory
• Morgan Hayward – Yield Financial Advisory
• Madeline Jacovides – Mazi Wealth
• Kathryn McDonald – Boutique Advisers
• Cara Williams – Sufficient Funds

TAL General Manager, Retail Distribution, Niall McConville, said “Now in its tenth year, the Female Excellence in Advice Award continues to recognise outstanding female advisers. We hope in celebrating the achievements and unique perspectives of each of today’s finalists we can encourage more women to become financial advisers and in turn encourage more Australians to engage with their finances.”

AFA CEO, Phil Anderson, said “The objective of this award is simply compelling, to get more females into the advice profession and to encourage more females to access financial advice. It is remarkable to reflect upon the fantastic winners and finalists over the ten years of this award, to see such fantastic role models, many of whom have gone on to take leadership positions within the profession. This year is no different, and I look forward to seeing the winner announced at the Gala Dinner on Friday 23 September 2022.”

Finalists will present to a judging panel in mid September about their business achievements, community involvement and views on mentoring, education, gender diversity and future vision.

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Kathryn McDonald

Investors should move to a forward-looking view on a company’s commitment to future emissions reduction or its carbon footpath, according to AXA Investment Managers (AXA IM).

As concerns surrounding climate change continue to intensify, equity investors increasingly need to understand how this could impact their investment portfolios. Climate data makes clear the urgency to address carbon emissions, and investors must consider the obvious financial concerns related to future fundamentals.

AXA IM has found listed equity companies are globally responsible for an estimated 18 gigatonnes of direct emissions from owned or controlled sources^[1] and would need to reduce their emissions by at least 30% from current levels – or almost 50% if revenue growth is accounted for – to meet the baseline scenario of a 2⁰C increase in global temperatures by 2030.

However, if considering the elimination of investments in top polluters based on current point-in-time emissions – or carbon footprint ­– investors need to take into consideration the impact on the diversification of their portfolio.  Hence AXA IM is advocating moving from carbon footprint to carbon footpath investment strategies.

“Many asset owners and investors are divesting from the largest polluters to reduce the carbon footprint of their portfolios. In practice, this approach, also known as ‘de-carbonisation’, has meant excluding investments in companies that exhibit high point-in-time emissions tied to company activity,” said Kathryn McDonald, Head of Sustainable Investing, AXA IM Rosenberg Equities.

“But a divestment-led approach can pose unintended problems for core equity investors in the form of increased active risk, and also means they have less leverage to use with respect to engagement with the goal of encouraging a transition towards greener and more sustainable products, technologies or activities.

“In addition, from a purely investment returns perspective, the divestment-led approach targeting point-in-time, absolute carbon intensities ignores the potential winners of a future low-carbon economy. It treats all polluters the same instead of seeking out those that are evolving.”

AXA IM believes investors need to take a holistic measure of a company using multiple data inputs.  For example, by analysing companies through the E score lens – a multi-dimensional view of a company’s environmental commitment – it is possible to identify the leaders and laggards within a sector in order to shed light on a company’s carbon ‘footpath’.

“Using our ‘E’ scores instead of carbon intensity to ‘de-carbonise’ a basket of stocks is just one way we can identify the companies that have done more to improve emissions by beginning to transition before others in their respective industries”, said Ms McDonald.

“We can, for example, find electric utilities that have shown a higher propensity to invest in renewable energy and storage solutions and divest from thermal coal.  In addition to E score, other data on company products and services, as well as transition behaviour is necessary in order to develop a full picture of ‘footpath’.

“Using this approach may not reduce portfolio point-in-time carbon intensity at the same rate, though the research did show a decrease.  But importantly, this ‘footpath’ approach means investors can manage investment risk by maintaining representation in all sectors and also potentially benefit from the upside of investing in the climate change leaders that are better able to navigate the rapidly tightening regulatory landscape.”

In January, Lonsec* upgraded the AXA IM Sustainable Equity Fund to “Highly Recommended” noting the Fund’s explicit inclusion of ESG considerations which it stated differentiates the Fund from similar factor-based quantitative peers. For the three years to December 2019, the Fund outperformed the MSCI ACWI ex-Australia index by 1.6% net of fees.

Ms McDonald added that, “As investors look to address the impact of climate change risk on their investment portfolios, it is important to note that aiming to reduce point-in-time carbon footprint through a divestment-led approach is an effective but blunt tool that may not be sophisticated enough for such a complex issue. Instead of leading with divestment, we need to incorporate several types of information to form a more holistic view of a company’s behaviour towards tackling the need to reduce global carbon emissions and protect the environment so that we can more concretely anticipate their pathway towards transition.”

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Kathryn McDonald

Income investors can implement a low-carbon strategy without sacrificing income, according to new research from AXA Investment Managers (AXA IM).

Hosting a series of roundtables for Australian institutional and wholesale clients and consultants across the country this week, AXA IM presented evidence showing that global equity dividend strategies can incorporate preferences for high environmental, social and governance (ESG) performance and reduced carbon without sacrificing yield.

The leading investment manager also provided insights into another rising trend — factor investing — outlining research showing how factors such as value and low volatility perform radically differently across countries and regions.

While momentum investing works particularly well in Australia, for instance, it performs poorly in Japan, challenging the view that factor investing can be implemented globally in a passive manner.

The research presented also highlighted the need for some active management to complement factor investing.

A May survey of 105 Australian investors by AXA IM found that 73% are considering ESG integration across all asset classes, while 54% are using factor investing in their equity portfolios.

Low correlation between carbon and dividends

As part of its research into ESG strategies for income investors, AXA IM analysed 4,200 stocks across emerging and developed markets globally.

The study showed that carbon is heavily skewed towards utilities and materials stocks, two of the sectors that also have high average dividend yields, suggesting at face value that investors might have difficulty cutting carbon investment while maintaining attractive income levels.

However, Kathryn McDonald, Head of Sustainable Investing at Rosenberg Equities, AXA IM, said the study found that most of the carbon is concentrated in a handful of high emitters that exhibit a variety of payout profiles.

Ms McDonald noted that if these high emitters are removed from high dividend strategies, overall dividend yields remain high while carbon emissions are approximately halved, showing there is little real correlation between carbon and income.

“This is proof that you can achieve a very attractive income while avoiding high carbon intensity stocks,” she said.

“For anybody who is committed to a low-carbon stance, the message is don’t think that you need to sacrifice on the income front, because you absolutely don’t.”

A related study also analysed the implications for income investors of targeting green opportunities, such as companies associated with green technology, green buildings and renewable energy. Again, it revealed that in almost every sector—including financials, industrials and even utilities—it is possible to find green opportunity stocks that also deliver high income.

Another element of the study looked at the relationship between good corporate governance and dividend yields or payout ratios. The study found that higher dividend paying stocks on average performed better on corporate governance measures such as protection of shareholder rights, transparency and management incentives. However, it did not find that investing in stocks with better corporate governance on average reduced the likelihood of dividend cuts and dividend cancellation, a major risk for income investors.

“As Australia enters a phase of superannuation decumulation, investors are increasingly preoccupied with how to generate income, as they look to deliver sustainable returns over a longer-term horizon,” said Craig Hurt, Head of Australia and New Zealand at AXA IM.

“Most ESG research to date has focused on growth assets/strategies in the accumulation phase. We focus instead on the role of ESG investing in the retirement phase where income generation is key. We find that dual preference for income and ESG considerations is very important when funds assess their members’ income needs in retirement.

“Our latest research shows that ESG investing can be used to avoid unwanted and uncompensated risks that might harm returns in the future, without hurting short term yields. “

Around the world in less than 80 factors: regional differences matter

In separate research on factor investing across the globe, AXA IM found that native factors —such as value, quality, sentiment and low volatility — varied in behaviour across different regions. Indeed, sometimes the same factor had little correlation across different regions of the world.

For instance, the research found that returns from momentum investing vary markedly from country to country. Over the last 20 years, the most successful place to ‘follow the herd’ has been Australia, whereas investors in Japan have been much less likely to follow market trends.

Similarly, while low volatility investment has paid off in the U.S. over the past two decades, the returns from employing such a strategy in Asia have been about half the magnitude.

Michael Kollo, Head of Strategic Research, AXA IM Rosenberg Equities, said the findings highlight the diversity of the factor ‘ecosystem’:

“Factor investing is sometimes represented as a ‘plug and play’ way to boost global portfolio performance, something that you would do in a passive manner.

“This is evidence that how you realise your factor strategy, for example which factors you employ in a particular region, critically impacts the long-term success of that strategy. In other words, factor investing still requires active management to work well. Algorithms need guidance too.”

Locally, AXA IM is managing AUD75 million in an Australian domiciled pooled fund, AXA IM ACWI SmartBeta Equity Fund – a fully integrated ESG equity fund offering local investors a more efficient way of capturing long term equity market returns while incurring lower volatility than a capitalised weighted benchmark.

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Kev Toohey

AXA Investment Managers (AXA IM) has launched its first ever fully integrated ESG SmartBeta strategy in the Australian market. The AXA IM ACWI SmartBeta Equity Fund (the fund) offers long term investors a more efficient way of capturing equity market beta, while avoiding the limitations of both market cap-weighted indices and alternative weighting schemes.

Powered by AXA Rosenberg, the quantitative investment arm of the global AXA IM group, the fund is now accessible via the Asgard platform, having been seeded with A$55 million from local Australian Financial Services Licensee, Financial Index Wealth Accountants (FIWA).

Kathryn McDonald, AXA Rosenberg’s director of investment strategy, said while smart beta and ESG might seem unrelated, both approaches reflected a move by investors away from standard index tracking.

“Overlaying smart beta with ESG is quite a new and novel concept but it’s one we feel is a very positive step. Our extensive research shows ESG smart beta can offer investors a lower risk and higher return than index investing, along with a defensive strategy with improved diversification and ESG performance – an attractive concept for long term investors.”

The fund also extends AXA IM’s well-established SmartBeta capability from developed to emerging markets via the All Country World Index (ACWI) ex Australia benchmark, offering  Australian investors a one stop shop for their global equity smart beta exposure.

New AXA IM fund now core part of FIWA’s global equity strategy

Advised by independent asset consultants Atchison Consultants, FIWA has said that based on a number of factors, the dealer group is open to increasing investment in the fund over the coming years.

Commenting on the partnership Kev Toohey, General Manager, at Atchison Consultants said the AXA IM ACWI SmartBeta Equity Fund was now a core element of its global equity strategy within the FIWA diversified strategies.

“We saw real value in moving away from a standard passive mandate towards a more effective means of harvesting the global equity beta. We were also attracted by the diversification play the fund’s emerging market exposure offers investors,” he said.

AXA IM’s SmartBeta strategies gaining positive traction

Today’s announcement follows Mercer’s A$150 million allocation to AXA IM’s global credit strategy in April this year. Globally, AXA IM’s smart beta strategies have garnered approximately US$2.5 billion from investors in the past 18 months.

Craig Hurt, AXA IM’s Director of Australia and New Zealand said a greater number of investors were implementing these intelligent, yet cost-efficient solutions:

“Since bringing our SmartBeta credit and SmartBeta equity strategies to the Australian market we’ve seen an increasing number of investors, both institutional and retail, look for a more intelligent and pragmatic approach to capture the market return. It’s exciting for Australia to be leading the charge on smart beta and ESG integration and that more investors, especially those in the post-retirement phase, can benefit from these types of solutions,” he said.

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