text stringlengths 0 7.73k |
|---|
Shareholder engagement ................................................................................................................................................... 18. |
Public policy outreach ........................................................................................................................................................ 19. |
Academic research .............................................................................................................................................................. 20. |
ESG-Related Investment products and communications towards clients ....................................................................... 20. |
ESG integration into insurance business ........................................................................................................................... 22 4) ESG and Climate-related Metrics and Targets ............................................................................................................. |
Carbon footprinting ............................................................................................................................................................ 24. |
Impact Fund KPIs & corresponding UN Sustainable Development Goals ........................................................................ 27. |
Avoided emissions .............................................................................................................................................................. 28. |
Internal environmental footprint management ................................................................................................................ 28. |
Renewable energy sourcing target ..................................................................................................................................... 29. |
SRI Ratings........................................................................................................................................................................... 29. |
AXA Entity Sustainability Index ........................................................................................................................................... 30 |
3. |
EDITORIAL - CLIMATE RISK ANALYSIS: COMBINING ANALYSIS AND ACTION. |
As UN Secretary General António Guterres at COP23 said, climate change is the “defining threat of our time”. On 12 December 2017, AXA’s CEO Thomas Buberl, during the One Planet Summit, announced new ambitious climate commitments, reiterating that “unsustainable business is un-investable and uninsurable”. AXA divested €... |
But what does a 2-degree scenario mean for our core investment and insurance business? |
In 2016, AXA initiated an analysis to test the alignment of our portfolio with such scenarios focusing on certain sectors. Building on the results of this analysis, in 2017, we adopted a new forward-looking “Value-at-Risk” approach, which aligns our equities and corporate bonds portfolio against company-level and secto... |
With this new approach, we hope to better understand climate-related risks for financial assets by anticipating “energy transition” risks and “physical risks” and their impacts on specific assets in our portfolio. Climate-related events are inherently difficult to anticipate, and climate-related financial risks are, th... |
Sustainability includes climate transition, but it is also about investing in education and promoting innovation, respecting human rights, ensuring strong corporate governance, enhancing business transparency, and so on. In other words, harmonizing financial profitability and sustainability requires integrating all ESG... |
This report is structured in line with the final recommendations of the TCFD. The recommendations, inaugurated in June 2017, aim to catalyse more consistent, comparable, and reliable disclosure of climate-related information. We believe that, beyond identifying and measuring climate risks, enhanced transparency and con... |
Convening on the two-year anniversary of the Paris Agreement, the One Planet Summit was a showcase of commitments towards the 2-degree goal. Multiple new investments, products, and partnerships were announced. Thus, it is worth noting that climate change is not only about tackling risks but also about leveraging opport... |
Laurent Clamagirand, |
AXA Group Chief Investment Officer. |
Jad Ariss, |
AXA Group Head of Corporate Responsibility and Public Affairs |
4. |
REPORT STRUCTURE: “ARTICLE 173” AND “TCFD” REPORTING FRAMEWORKS COMBINED. |
This report describes AXA’s Responsible Investment (RI) initiatives in line with the voluntary disclosure recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD, focusing on climate risks) and the mandatory disclosure framework related to the French “Article 173 VI” decree (which considers ESG ... |
1) GOVERNANCE OF ESG AND CLIMATE-RELATED RISKS AND OPPORTUNITIES. |
OVERALL APPROACH. |
AXA defines Responsible Investment (RI) as the integration of Environmental, Social and Governance (ESG) considerations into investment processes, including ownership practices. Our conviction is that ESG integration may impact long-term investment performance by offering an enhanced understanding of risk drivers. This... |
ESG AND CLIMATE-RELATED GOVERNANCE. |
AXA created a Group-level Responsible Investment Committee (RIC), chaired by the Group Chief Investment Officer, and including representatives from AXA Asset Management entities, Corporate Responsibility (CR), Risk Management and Communications. The RIC reports to the Group Investment Committee, chaired by the Group Ch... |
5. |
Every year, the Board’s Compensation & Governance Committee examines the Group’s Corporate Responsibility strategy, with a strong focus on AXA’s ESG and climate-related strategy. The CR Strategy may also be presented to the entire Board of Directors on an ad hoc basis. Moreover, the AXA Stakeholder Advisory Panel, whic... |
Insurance-related ESG risks and opportunities benefit from a specific governance, notably the Group Underwriting Committee, which defines underwriting limits. In addition, a dedicated team within Group Risk Management analyses Emerging Risks via a specific framework, tools and local network. These risks, which often re... |
6 2) STRATEGY – IDENTIFICATION OF ESG AND CLIMATE-RELATED RISKS AND OPPORTUNITIES |
2.1 INVESTMENTS. |
GLOBAL RESPONSIBLE INVESTMENT STRATEGY. |
AXA’s RI strategy, embodied in its Global RI Policy (public on www.axa.com), is based on five main pillars: • Integrating ESG performance scores into investment processes and decision-making, using KPIs and qualitative research across most of our assets. In addition to ESG, we implement a carbon footprinting methodolog... |
• Excluding sectors or companies that face acute social, human rights, ethical or environmental challenges. These sector restrictions (which apply both to investments and insurance) currently include: controversial weapons, coal mining / coal-based power generation, oil sands and associated pipelines, palm oil, food co... |
• Promoting “Green” investments across different asset classes, based on proprietary criteria derived from a recognized market standard. These include bonds, infrastructures (debt and equity), property and commercial real estate (CRE) loans. |
• Developing “impact investments” delivering positive environmental or social as well as financial returns which are actively tracked. AXA launched two impact funds, focusing on themes such as access to finance and healthcare, climate resilience, education, renewable energy, etc. |
• Active stewardship through voting and engagement on a range of ESG or sustainability issues. |
The AXA Group as well as its two Asset Management entities (AXA IM and AB Global) are signatories of the UN-backed principles for Responsible Investment (UN PRI, www.unpri.org). The UN PRI is a major collective initiative that seeks to promote responsible investment among investors and asset managers. The Group’s 2017 ... |
7. |
INVESTMENT-RELATED ESG RISKS AND OPPORTUNITIES IDENTIFICATION: SCORING TOOLS AND. |
METHODOLOGY. |
AXA tracks its investments’ ESG performance with accuracy by leveraging AXA IM’s “RI Search” tool (and MSCI ESG data at AB), where cross-asset ESG scores and “impact-type” metrics are engineered and stored. The RI Search tool is also the dedicated recipient to manage ESG scores for non-listed assets, such as building p... |
• Sovereign issuers: AXA’s ESG scoring framework for countries is based on public data sources such as the World Bank, the OECD, and the UN. It currently covers more than 100 countries, both developed and emerging. This approach places the ESG assessment of countries at the heart of the notion of “sustainable growth” b... |
• Real Assets: AXA’s ESG scoring frameworks for Real Assets covers 3 asset classes: direct property, commercial real estate loans and infrastructure debt. The ESG scoring for these assets is based on proprietary dedicated questionnaires. The overall asset ESG score is a combination of various sources of ESG risks asses... |
At AXA IM, ESG training is provided for the Fixed income, Equites and Real estate teams and Portfolio Managers on a continuous basis. Approximately 50% of Portfolio Managers, 40% of analysts and 25% of sales staff are trained. |
Carbon footprinting, across asset classes, is developed in section 4. |
8. |
INVESTMENT-RELATED CLIMATE RISKS AND OPPORTUNITIES IDENTIFICATION. |
Converting international climate objectives (such as those derived from the COP21 Paris Agreement, French or EU energy mix targets) into quantitative investment targets is a new and complex risk modelling exercise which AXA tested in 2016 using a methodology developed by the “2° Investing Initiative” think tank. Buildi... |
Transition Risk analysis: our approach to assessing climate impacts on AXA’s Corporate Bonds & Equities portfolio. |
AXA is reviewing an external methodological framework (developed by Carbon Delta) that models transition risks at company and sector level relating to “policy risks” (as defined in the TCFD recommendations) for curbing greenhouse gas (GHG) emissions, which correspond to the long-term goal of the 2015 Paris Agreement to... |
This scenario analysis currently focuses on our corporate bonds and listed equity portfolios (45% of AXA’s General Accounts assets). The climate risks and opportunities modelling has been undertaken using a top down approach. The risk model uses the following steps. |
• The risk modelling starts by establishing absolute GHG emission reduction targets for each country, according to the “Intended Nationally Determined Contributions” (INDCs) that were submitted as part of the 2015 COP 21 Paris Agreement. |
• Those national targets are then broken down to sector level, based on a detailed review of each INDC as well as country-specific climate policies. |
• Company-level targets are then established based on the GHG emission profile of their individual assets / facilities. |
• Finally, after each facility has been assigned a GHG emission reduction target in line with each INDC, future emissions reduction costs forecasts (as calculated by the Potsdam Institute for Climate Impact Research) are multiplied by the reduction target in order to attain a facility specific cost of meeting the reduc... |
• These facility-level emission reduction costs are simply aggregated at company level in order to attain the “policy risks” associated with reaching the INDC targets. |
In addition to this risk analysis, an “opportunities” analysis is also conducted. To assess the “low carbon” innovation potential of companies, a climate transition opportunities analysis based on issuer-level patent data is conducted. Indeed, patent databases have a global reach and can be used to assess low-carbon te... |
• First, patents are clustered into their appropriate technology classes, differentiating between low-carbon and classic technologies. |
• Then the quality of each patent is assessed using standard valuation procedures, such as counting academic quotations, developed with patent offices and patent managers. |
• Third, the same cost calculations established in the “policy risks” model outlined above are applied at global sector level. However, the same total costs are redistributed at sector level as revenues, based on the low carbon patent score of each company’s patent portfolio. Therefore, using patent analysis as a proxy... |
9 capacity, one can simulate which companies will be the likely beneficiaries if/when 2°C policies are implemented on a global level. |
A forward-looking “Climate VaR” |
Taken together, the “policy risk” model combined with the “technology opportunities” model assess the downside costs of climate change policy as well as the additional green revenues that are attainable by the most innovative companies in their field. Forward-looking quantitative results are used, in the form of compan... |
This Climate VaR per security is calculated for equities and corporate bonds to understand the impact that future costs and/or revenues might have on the current pricing of these securities. A Dividend Discount Model (DDM) is also used to compute the impact that new, climate policy costs and revenues will have on futur... |
Default risk and spreads. |
Since the payout profile of a bond is significantly different from equity, the effect of climate change onto the bond price, based on the change in default risk of the issuer, must be carefully modelled and cannot simply inherit the risk values from the associated equity. The higher the default risk, the lower the pric... |
While future emission reduction costs would have no impact on the bond price per se – they must be paid for entirely by the shareholder – they would still indeed influence the EBIT of a company. Essentially, future costs must be subtracted from future EBIT, thus effectively reducing interest cover. Via this process, th... |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.