Lise Moret

The COVID-19 pandemic has wreaked havoc for the global healthcare system, economy and markets but there has been a ‘green lining’ in the form of lower carbon emissions, according to the latest research from AXA Investment Managers (AXA IM).

With countries reaffirming their commitment to the Paris agreement this year, the reduced emissions could set the stage for a renewed focus on global stewardship and responsible investment. AXA IM is calling on government and regulators to condition business support on a decarbonisation criteria.

Lise Moret, AXA IM’s Head of Climate Strategy, said the Coronavirus outbreak had forced global economies to make rapid changes to limit the pandemic, resulting in significantly lower emissions, but that more needed to be done.

“To achieve our commitment to the Paris Agreement, and limit global warming to 1.5°c in temperature rise, it would take a COVID-19-like event every year until 2050,” Ms Moret said.

Figures from specialist publisher Carbon Brief estimate that carbon emissions in China fell by 25% in February alone^[1] , while the EU could face a drop of 25% in 2020 when compared to 2019 levels^[2]. Overall, it is estimated the global emission impact of Coronavirus will be -5.5%, the largest annual reduction since records began^[3].

“While globally we have significantly reduced our impact during the height of the pandemic, the question now is whether the world can use this moment to find a ‘new normal’ and build a less carbon-intensive economic model – a model that could put the temperature goals of the Paris Agreement tantalisingly within reach,” Ms Moret said.

“One clear point about the hit to global GDP is it is likely to be temporary, and that means the drop in emissions will likely be temporary too. For all our progress over the years, we have not yet successfully decoupled economic growth from carbon emissions.

“We believe the Coronavirus outbreak should harden policy thinking and investment around climate change and the need for decisive and collaborative action to tackle global, existential threats.”

In an environment where regulators are deprioritising green projects, Ms Moret said there was currently a clear opportunity for policymakers to deploy green stimulus by conditioning support for businesses on decarbonisation criteria. This could include continuing to incentivise oil and gas companies to decarbonise and providing incentives for utility companies to transition away from coal and into renewables.

“We have been given a glimpse of the kind of adjustments our world needs to make if we are to definitively tackle the looming threat of the climate crisis. Far from distracting us from this, COVID-19 should harden our resolve while teaching us valuable lessons.”

A decade of transition

According to AXA IM’s 2019 Global Stewardship Report, climate change accounted for more than 40% of the investment manager’s total engagement with companies. In a 12-month period, AXA IM engaged with 217 issuers, voted at 6016 general meetings, and 64,439 proposed company resolutions were voted in. This is an increase of engagement by 74 per cent from 2018 levels.

Matt Christensen, AXA IM’s Global Head of Impact Strategy and Responsible Investments, said climate change would remain a key focus area for AXA IM’s stewardship team, along with biodiversity loss, diversity and public health.

“As an industry, we are moving away from the narrow definition of fiduciary duty – a transition that we at AXA IM firmly support,” Mr Christensen said.

“The next decade will be defined by our ability as an investment and corporate community to turn our thoughts and ambitions into tangible action to solve global issues. This will create long-term value for shareholders, stakeholders, and society.

“Today we are at the starting line. The road ahead requires both imagination and pragmatism to meet a daunting set of challenges. As we move into a decade of transition, active investing will require a more activist approach that incorporates sustainability into its DNA. We are committed to a better tomorrow, and tomorrow starts today.”

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[1] Carbon Brief, April 2020
[2] Independent Commodity Intelligence Services Company
[3] Carbon Brief, April 2020

Matt Christensen

Executive remuneration remained a hot topic in 2017/18, as shareholders continued to call for improved disclosure around variable pay targets and performance, according to AXA Investment Managers (AXA IM).

Remuneration accounted for 68% of AXA IM’s votes against management in Australia, compared to 42% in the Eurozone, 26% in Asia-Pacific and 24% in North America, figures from AXA IM’s 2017/18 Responsible Investment and Stewardship Report show1.

Matt Christensen, Global Head of Responsible Investment, said market disclosure around executive remuneration in Australian companies continued to lag other more developed markets.

“This opaqueness makes it difficult for shareholders to visualise a clear line of sight between executive reward and company performance, to ensure that executives are not unduly rewarded for performance that does not align with shareholder wealth outcomes,” he said.

Mr Christensen said the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was helping to highlight the issue of executive remuneration in Australia.

“When looking at examples such as the recent $700 million fine Commonwealth Bank received for money laundering and terror financing breaches, it would be difficult for companies to justify how executive pay would continue to pay out substantially while shareholders foot the bill for executive mismanagement at the top,” he said.

According to Craig Hurt, Head of Australia and New Zealand, AXA IM, professional managers need to provide greater guidance and better strategies so that investors can avoid inadvertently rewarding a lack of transparency.

“Australian investors are increasingly sensitive to corporate behaviour when thinking about where to invest their retirement savings”, said Mr Hurt.  “However, it is difficult for individuals to identify discrepancies in things such as executive remuneration and disclosure. The AXA IM Sustainable Equity Fund actively takes into account such issues when assessing companies in which to invest.  The fund is certified by the Responsible Investment Association Australasia.”

A global shift

Globally, attention has moved away from a sole focus on aligning executive rewards with share price performance, to a focus on how executive remuneration aligns with the general workforce and social expectations.

Some of the reforms recently undertaken include the publication of gender pay gaps in the UK and the Dodd-Frank requirements to disclose CEO pay to median pay in the US, which have revealed some extreme pay differentials.

Mr Christensen said, “AXA IM is always supportive of reforms that require improved and increased disclosure in markets, allowing shareholders further clarity and better oversight of the companies in which they invest.”

“However, it remains to be seen whether these reforms will lead to long-term shifts in the way boards and companies think about executive pay and reward.”

Continued activism

As a responsible investor, AXA IM incorporates environmental, social and governance (ESG) issues into its investment decision-making process and also holds companies to account by engaging with management and voting at shareholder meetings.

Of the 147 Australian meetings voted on in 2017, AXA IM voted against management recommendations at 26 meetings (18%).

During the 2017 AGM season, AXA IM championed the need for additional independent voices on the board at Ramsay Health Care.

Mr Christensen said AXA IM would continue to push companies globally to improve their remuneration disclosure practices.

“Where it becomes difficult for us to decipher how or to what extent an executive is being rewarded for meeting certain performance criteria or where we feel that performance criteria do not reflect the key performance indicators of the business, we would not hesitate to voice our discontent and take further steps,” he said.

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1. RI: How will impact investing measure up in the mainstream? AXA IM 2017/18

Matt Christensen

AXA Investment Managers (AXA IM) has announced the launch of a new impact-style investment strategy designed to capitalise on companies promoting gender diversity.

The move ties into the growing global trend towards investments that look to solve social issues, while providing similar risk-return characteristics to traditional managed equity funds.

The strategy – The AXA World Funds – MiX in Perspectives – aims to generate long-term capital growth from companies that create financial and societal value by fostering gender diversity and leveraging the increasingly important economic role of women.

The strategy – The AXA World Funds – MiX in Perspectives – aims to generate long-term capital growth from companies that create financial and societal value by fostering gender diversity and leveraging the increasingly important economic role of women.

Following the official launch in Europe last week, AXA IM intends to open an Australian domiciled pooled fund for the same strategy this year. Speaking at a media briefing yesterday, AXA IM’s Paris-based Global Head of Responsible Investment Matt Christensen said the new strategy allows investors to benefit from the proven link between gender diversity at a senior management level and a company’s financial performance.

“Research^[1] has shown $12 trillion could be added to global GDP by 2025 by investing in the advancement of women’s equality. We saw a great opportunity to create a ‘gender diversity’ impact strategy that favours investments in companies that demonstrate a strong commitment to promoting women in senior management and leadership positions,” Mr Christensen said.

The rise and rise of impact investing

According to Global Impact Investing Network^[2], impact investing is expected to grow from US$50 billion to US$2 trillion by 2025. Mr Christensen said there was growing interest in better capturing how investment impact is measured beyond financial criteria.

“Until quite recently impact investing was only really cropping up in the alternatives space, but it is now increasingly prominent across a broader set of asset classes. For example, in Australia we are now seeing the rise of social impact bonds,” Mr Christensen said.

All eyes on French RI regulation

Mr Christensen added that since the 2015 COP21 initiative, investors globally and in Australia were keeping a watchful eye on French RI regulation.

“French regulation has boosted the development of RI by focusing on two key aspects. The first relates to how relevant parties are integrating environmental, social and governance (ESG) criteria in their investment strategy. The second aspect specifically focuses on environmental criteria, and encourages investors to explain the measures they have implemented to support the transition towards a low-carbon economy on an annual basis.

“The EU is currently reviewing this model for a wide-reaching legislative requirement, including a working group that will publish recommendations for 2018 as policy guidance,” Mr Christensen added.

Craig Hurt, Director, Australia and New Zealand at AXA IM said Australia was following the global trend of mandating companies to disclose their ESG performance.

“We see the expansion of Australia’s pension fund regulation to include specific RI requirements as a very positive step for the local RI sector.

“Local investors have become even more sophisticated in the way they view RI vehicles with a gradual shift from a traditional model of negative screening to an active desire to contribute to the greater good of society,” Mr Hurt said.

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[1] McKinsey Global Institute, September 2015
[2]What is the Market Potential of Impact Investing? (Issue brief)  Global Impact Investing  Network

Matt Christensen

AXA Investment Managers (AXA IM) ysterday announced its fully integrated ESG (environmental, social and governance) smart beta equity pooled fund – AXA IM ACWI SmartBeta Equity Fund (the Fund) – has received further industry accolades in recognition of its unique structure and ability to outperform the market.

Following on from recent accolades which have included the Fund receiving a Morningstar Sustainability Rating™ of High1 and Responsible Investment Certification by Responsible Investment Association Australasia (RIAA), independent researcher Lonsec has now awarded the Fund a “Recommended” rating specifically recognising its ability to generate risk adjusted returns.

In the assessment, Lonsec acknowledged that in comparison to its peers, the Fund offers investors a low-fee, systematic approach, coupled with ESG considerations, to access global equities with volatility expected to be less than the benchmark.

Managed by AXA IM’s Rosenberg Equities team, the Fund is designed to give Australian long term investors a more efficient way of capturing global equity market beta, while avoiding the limitations of both market cap-weighted indices and alternative weighting schemes. Since launching in August 2014, the Fund has achieved an annualized return of 18.4%, outperforming its MSCI ACWI benchmark by 4.69% (AUD performance as at July 31, 2016).

AXA IM’s Sydney-based Executive Michelle Lacey said the rating highlighted the Fund’s ability to offer investors both the benefits of lower volatility while also improving long-term returns.

“The smart beta equity strategy offers a sensible middle ground between blind index tracking and alpha-oriented strategies so equips equity investors with a better chance of improving long-term investment success in a more cost efficient way.

“We are pleased to have the Fund recognised for generating quality returns at its two-year launch anniversary. The market has become more comfortable with the concept of smart beta investing and we’ve seen growing interest from both institutional clients and dealer groups,” Ms Lacey said.

Replicating Australian smart beta ESG integration success: new fund launched in Europe

Following the initial successful ‘Australia first’ launch two years ago, AXA IM has also recently launched a new fund in Europe – The AXA World Funds Global SmartBeta Equity ESG fund.

AXA IM’s Paris-based Global Head of Responsible Investing Matt Christensen commented on the opportunities in the European market to replicate the success in Australia.

“It’s been exciting to see how Australia has really led the charge on smart beta and ESG integration and that a wider pool of investors can now benefit from these types of solutions.

“Investors globally are increasingly focussing on how to manage their ESG risks and this is a trend which is not going away. We firmly believe that we will see the gradual progression of responsible investment from a specialist area to a ‘must have’. As such this fund is well positioned to help clients to better consider ESG risks and opportunities,” Mr Christensen said.

Notes: 1 Out of 73 Equity World Large Blend funds as of 30/06/2016. Based on 99%of AUM. The Morningstar Sustainability Rating™ is used by investors to evaluate how well the companies in a fund portfolio are managing the environmental, social and governance (or ESG).

Matt Christensen

AXA Investment Managers (AXA IM) plans to offer its impact investing fund of funds strategy to external investors in response to growing client demand. The move forms part of AXA IM’s growing suite of multi-asset ESG integrated strategies which are gaining positive momentum with global and Australian investors.

AXA IM’s global Responsible Investment team began working with AXA Group last year to develop its impact investing approach, which focuses on sectors including healthcare, education and finance. A total of EUR200 million of internal funds has been allocated to the strategy in 2014.

Impact investing – which is broadly defined as investments in business and/or funds that generate social and/or environmental benefit in return – is gaining fierce momentum among sizeable institutional investors both globally and in Australia. Research* shows the impact investing market is predicted to grow up to US$1 trillion by 2020 or 1% of global assets.

Paris-based Matt Christensen, Global Head of Responsible Investment at AXA IM, who is in Australia this week presenting at the ASFA conference, said: “While the impact investing market is still in its relative infancy much progress has been made to 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).

“We’ve been very encouraged by the progress the impact investing fund of funds strategy has made to date and the attention it’s getting from investors. We hope to launch a second fund in 2015 which would be open to external investment and accessible to global and Australian institutional investors,” he said.

AXA IM wins global mandate for ESG high yield strategy

ERAFP, the 100% socially responsible €20bn French public service pension scheme, has awarded AXA IM a fully ESG integrated active high yield mandate to help the fund broaden its investment universe in line with its SRI charter.

“This is yet another example of the type of demand we’re seeing from clients across the globe who want fully integrated ESG solutions to meet their specific requirements,” Mr Christensen added.

AXA IM ACWI SmartBeta Equity Fund shows strong performance

AXA IM’s first ever fully integrated ESG SmartBeta strategy, launched in Australia in August this year, has delivered 2% above benchmark returns in its first three months. 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.

“ESG and smart beta may seem unrelated, but both approaches reflect a move by investors away from the unintentional and often uncompensated risks associated with traditional index tracking and a greater willingness by investors to make their own determinations about desired exposures, risks and expected returns,” Mr Christensen said.

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

Craig Hurt, AXA IM’s Director of Australia and New Zealand, said, “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.

“It’s great to see ESG integration getting firmly on the radar and that more investors, especially those in the post-retirement phase, can benefit from these types of solutions.” 

*J.P. Morgan, GIIN 2011

For further information please contact:
Susie Bell (Lambert)

Matt Christensen

Global investors are increasingly asking for the monitoring and assessment of environmental, social and governance (ESG) risks in their portfolios according to a report published by AXA Investment Managers.

Paris-based Matt Christensen, Global Head of Responsible Investment at AXA IM, who is in Australia this week presenting at the GTQ Investing in Responsibility Conference in Sydney said: “Our clients are assigning greater importance to how ESG factors impact their returns in the long run. In the last twelve months we have worked with several European pension funds as well as AXA Group to help them take responsible practices into account more explicitly. This is a clear trend and is gaining momentum globally and in Australia.”

AXA IM has responded to this demand by increasing its stewardship activities and coverage in 2013. The volume of responsible investment assets managed by AXA IM grew by 18% in 2012.

Impact investing catches attention from global and local funds

Impact investing – which is broadly defined as investments in businesses and/or funds that generate social and/or environmental benefit in return – is starting to catch the attention of sizeable funds globally and locally.

“The impact investing market is still relatively 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.

AXA IM is currently working with AXA Group on an impact investment fund of funds strategy.

Integrating ESG and Smart beta

According to AXA IM, another area in the investor spotlight is the compatibility of smart beta and responsible investment.

“The concepts may seem unrelated, but both approaches reflect a move by investors away from the unintentional and often uncompensated risks associated with traditional index tracking and a greater willingness by investors to make their own determinations about desired exposures, risks and expected returns. There has been little academic research on their compatibility to date, but our back-tested investment analysis shows that ESG SmartBeta has the potential to offer investors a lower total risk and higher return than index investing, along with improved diversification and strong ESG performance.

“A number of academic studies* have shown there has been no penalty for pursuing a responsible investment approach, which was a concern for some investors in the past,” Christensen said. “Analysing assets according to ESG factors as well as traditional financial factors can uncover risks and opportunities that might otherwise not come to light. Responsible investment analysis is simply a good risk-aware way to manage a portfolio,” Mr Christensen said.

The Responsible Investment team is also working with AXA Rosenberg, the quantitative equity expertise within AXA IM that manages SmartBeta Equity, to offer integrated ESG and Enhanced Index solutions.

Craig Hurt, Sydney-based Director of AXA Investment Managers in Australia and New Zealand, said: “Through the strength of our global RI research initiatives, we aim to offer Australian institutional investors – and their individual members and investors – a wider opportunity to invest in strategies incorporating ESG principles, a demand that we can only see increasing in the years to come.”

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 capabilities

A 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.”

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[1] Monitor Institute:2009 ]]>

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 capabilities

A 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.”

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[1] Monitor Institute:2009

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