text stringlengths 0 7.73k |
|---|
Some conclusions. |
To improve the 2°C alignment of its portfolios, AXA has identified a number of alternative companies for intra-sectorial stock reallocation in the automotive and utilities sectors. This approach is particularly pertinent for AXA, which as a diversified investor, is more suited than inter-sector reallocation. However, f... |
Similarly, the following graph demonstrates a list of automotive companies that have planned electric and hybrid production through 2020 that both fall short and exceed that needed under a 2°C scenario. To |
Page 27 sur 49 improve portfolios automotive mix, a process of investment reallocation from automotive makers with least exposure to electric and hybrid models renewables, for example Fiat Chrysler, to those with higher exposure, such as Tesla or Toyota, would be beneficial. |
Flaws & limits. |
The 2° alignment test is not without inherent flaws: • A majority of the sectors are unable to be assessed under the current framework, leaving a large portion of the portfolios, by value, unassessed. • This framework only supports climate assessments through 2020 due to data limitations on companies’ plans beyond this... |
Page 28 sur 49 attributed to both corporate expenditures and how much of these expenditures are allocated to project equity financing. For this reason, the portfolio weight allocation is utilized as a proxy to determine portfolio’s intention and impact for bond selection. • For bonds, it is likely that not all bonds wi... |
Back-testing. |
AXA performed a back-test on its FI portfolio (same portfolio used in the 2°C alignment assessment) to test how to best improve its 2°C alignment via a quantitative approach. This approach examined which bonds could be sold or not repurchased upon maturity and which bonds within the current portfolio could be additiona... |
To meet the 2°C benchmark, the portfolio needed to reduce exposure to fossil-based power generation and increase its exposure to renewables in its energy mix. Thus, we ranked the top contributors for oil exposure and analyzed which have highest positive impact on our overall energy mix; i.e. how to reduce oil exposure ... |
Our simulations concluded that with only a 1% portfolio turnover, AXA could (nearly) meet the 2°C benchmark without altering the sector allocation. Using only redemption (bonds maturing) after 2017, and keeping sector allocation, duration, and average rating unchanged, we were able to match our objectives on all 5 metr... |
AXA Fixed Income. |
Coal Capacity (% of energy mix) |
Gas Capacity (% of energy mix) |
Hydro Capacity (% of energy mix) |
Nuclear Capacity (% of energy mix) |
Oil Capacity (% of energy mix) |
Renewables Capacity (% of energy mix) 2° investing Threshold 18% 31% 16% 9% 4% 22% |
Portfolio current situation as at Sept-end 2016 11% 21% 17% 29% 5% 17% |
Portfolio simulation postoptimization 9% 19% 17% 30% 3.9% 21% 10 There is no energy mix objective for nuclear. |
Page 29 sur 49. |
This method of stock selection is not without considerable flaws. Nearly a third of the bonds with positive energy mix contributions in the portfolio mature in 2017. Thus, there is a need to pay particular attention to the reinvestment scheme if we don’t want the portfolio to deteriorate. There is also no guarantee tha... |
“Greenshare” |
AXA examined the two portfolios to assess their contribution to the energy transition of their holdings using Low Carbon Economy (LCE) tool developed by FTSE Russell. Each company held in the portfolio is analyzed according to their minimum percent of their revenues derived from activities that are determined to either... |
Fixed Income Portfolio. |
AXA tested its FI portfolio (the same as used in the 2°C alignment assessment): • 95.2% of the holdings, by weighted value, have a minimum green share of 0-10%. • 3.4% have a minimum green share of 10-50% • 1.3% have a minimum green share of over 50%. |
Compared to a global corporate bond index, our portfolio is in line with the market. |
11 http://www.developpement-durable.gouv.fr/Creation-d-un-label-Transition.html |
Page 30 sur 49. |
Global Equity Portfolio. |
AXA tested its global equity portfolio for green share (the same as used in the 2°C alignment assessment): • 95.3% of the holdings, by weighted value, have a minimum green share of 0-10%. • 2.8% have a minimum green share of 10-50% • 1.8% have a minimum green share of over 50%. |
Again, compared to a global equity index, our portfolio is roughly in line with the market. |
This method is not without flaws. The FTSE LCE models system provides a range of green share revenues for each company, giving a minimum and maximum. Due to non-disclosure by companies on their revenues, this can often give a very wide range (ex: 0-90%) for a company. Thus, the real green values are likely higher than ... |
Criteria 2.2.3. Asset-class coverage. |
Our analysis covers corporate bonds and Equity. |
Criteria 2.2.4. Sector / technology coverage. |
Our 2°C alignment assessments cover the oil and gas, automotive, and utilities sectors. Our back-test examines exclusively the utility sector. However, in the future, this can be applied to any sector for which 2°C alignment analysis was performed. Our “green share” assessment is applied to all sectors. |
Page 31 sur 49. |
Criteria 2.2.5. Reporting on scope of investee activities/organizational boundaries. |
See the previous sections to see our scope of investee activities and organizational boundaries. |
Criteria 2.2.6. Time horizon. |
Our analysis covers 2015-2020 time period. |
Criteria 2.2.7. Geographic granularity of the analysis. |
Our analysis has a worldwide coverage. |
Criteria 2.2.8. Disclosure of results at relevant granularity. |
See the previous sections to see disclosure of results. |
Page 32 sur 49 2.3 Climate Risks. |
Criteria 2.3.1. Relevance of the climaterelated risk management. |
Climate change is a pressing global challenge with associated risks that will invariably have material impact for diversified investors. In the case of business-as-usual scenarios, climate change will lead to an increase in physical climate-related risks resulting in an increase in liabilities and a potential decrease ... |
Consequently, AXA assesses both physical and transitional climate change-related risks. These two risk categories, however, work through different channels and pose different risks across sectors, and thus need to be measured independently. Our methodologies examine the associated risks at the portfolio level, each sec... |
See the following sections for the time horizons of risk analysis. |
Criteria 2.3.3. Physical risks: comprehensiveness of the risks analyzed 12 This is done, to some extent, for the physical risks. |
Page 33 sur 49. |
AXA developed an approach to analyze physical risks for some of its real assets, including AXA France Property and Group Infrastructure debt portfolios. The analysis covers 12.6Bn€ of real estate and 3Bn€ infrastructure debt out of total collective portfolio values of 31Bn€. AXA’s property portfolio is essentially base... |
AXA examined two portfolios representing our overall Real Asset exposure: AXA France Property portfolio and AXA Group Infrastructure debt, both with nearly exclusive European exposure. |
Our physical risk assessment methodology uses the approach of our Risk Management team to analyze the extent to which natural catastrophes (“NatCat” models – generally used to assess claims-related exposure) would impact our assets. Our analysis covers 100% of infrastructure debt portfolio and 41% of our real estate pr... |
Our methodology first examines the geolocation of each asset in the portfolio. Where necessary for investments in multiple locations, the investment value is divided across the number of sites that are part of the asset. European-specific destruction rates due to windstorms are then used from AXA’s internal NatCat mode... |
In the future, we intent to add the risk of flood risks, which would likely increase estimated annual damages by 30%. Drought, in the context of mainly European-exposed portfolios, is estimated to be a much more minor risk. We hope to additionally refine geocoding information of infrastructure portfolio investments and... |
Note that for debt, relevant in this context to the infrastructure portfolio, it is assumed that each asset is fully owned by AXA, which is generally not the case. Our analysis does not differentiate risk according the ratio of debt to the total asset ownership, which could be relevant for determining real impact. |
91% 9% |
Real Estate. |
Infrastructure Debt 98% 2% |
Europe Non-Europe. |
Breakdown of Infrastructure Portfolio by Geography. |
Breakdown of Real Assets Portfolios by Asset Type |
Page 34 sur 49. |
Criteria 2.3.4. Physical risks: granularity of the analysis. |
The following graphs demonstrate the results of the physical risk exposure for the infrastructure exposure in two terms: 1) Annual Average Loss, meaning the averaged loss generated by European windstorms every year and 2) 100-yr event loss, meaning the loss generated by one European windstorm characterized by the proba... |
The following tables demonstrate the complete analysis of the potential physical risks due to windstorms for both portfolios. |
Group Infrastructure debt AXA France Property. |
Total Investments’ amount (initial) 2 972 M€ 12 558 M€ |
Total Investments’ amount (used) 1 699 M€ 11 191 M€ |
Total loss AAL 0.2 M€ 0.6 M€ |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.