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Windspeed? Duration? Track? |
VULNERABILITY MODULE FINANCIAL MODULE. |
APPLY EXPOSURE QUANTIFY FINANCIAL LOSS. |
CALCULATE DAMAGE. |
How ofen? |
How big? |
Where? |
How are the risks damaged? |
What are the insurer’s losses afer the application of financial conditions? |
AXA’s physical risk assessment uses natural catastrophes (“NatCat”) models which are generally used to assess the impact of natural catastrophes on insured exposure. Our models combine stochastic events in Europe (storms and floods), the US and Japan (tropical cyclones and related perils) with a geolocation-based portf... |
Real Assets. Specific “destruction rates”, which factor in location, building or infrastructure type, occupancy, and construction materials are then used to determine potential damage rates and derive a loss for each building. This process is outlined in the diagram above. |
Methodology Box. |
Real Assets: Factoring the “Physical” Risks of Climate Change. |
In addition to the above climate impact assessment conducted for corporate and sovereign assets, climate change, and in particular extreme weather events, may impact “Real Assets”, such as real estate, which are primarily subject to so called “physical risks” in TCFD terminology. |
In our first Climate Report (2016), AXA conducted an analysis on a selection of €15 billion of property assets. This analysis has since been expanded in 2019 to cover a broader scope of €32 billion of property, Commercial Real Estate debt and infrastructure debt. AXA’s Investments and Risk Management teams evaluated th... |
€32bn Real Assets analysed against physical climate risks. |
The world is not yet "Paris-aligned", even if the parties to the Paris Agreement were to fully implement their national commitments. While proactive investors can reorient some capital flows, for example via divestments and sector reallocations, they remain largely dependent on a broader macroeconomic situation which t... |
Paris Agreement ideal goal. |
Reference scenario / BAU AXA benchmark Unconditional NDCs. |
Paris Agreement minimum goal 4.0°C 3.7°C 3.2°C 2.0°C 1.5°C |
24 AXA GROUP 2019 Climate Report June 2019 2. Strategy. |
Our results, which are based on an internal exploratory methodology, show that both annual average losses, as well as losses generated by flood and storm events with a return period of 100 years, remain limited compared to the total asset value. This is consistent with findings we disclosed in our 2018 TCFD report, des... |
(1) This excludes the addition of Japan for 2018. |
For instance, in France where about a third of AXA’s real assets are located, although exposure has increased by 5%, average annual losses from windstorms has decreased by 9%. Mapping 2017 and 2018 asset exposure reveals that the decrease in overall windstorm risk for the France portfolio can be accounted for by the di... |
Significant reductions in average annual losses from windstorms in the UK and US portfolios are similarly explained by changes in the composition of asset locations. The increase in asset exposure in the UK has been accompanied by a simultaneous decrease in exposure to annual losses associated with windstorms and an in... |
In conclusion, it is clear that, on the basis of our in-house risk modelling, the financial impacts of climate-related “physical risks” on our current Real Estate assets are very limited. Obviously, AXA is more exposed to such risks as an insurer – but this is the core of AXA’s insurance business. Indeed, AXA’s insuran... |
Potential Average Annual Losses to AXA’s Real Estate Portfolio Due to Floods and Windstorms €Million % of Exposure. |
Floods Windstorm 2017 2018 2017 2018. |
Belgium 9.5% -0.2 0.2. |
France 31.9% -0.6 0.5. |
Germany 12.0% 0.4 0.4 0.2 0.2. |
Luxembourg 1.0% -0.0 0.0. |
Switzerland 35.9% -0.3 0.4. |
UK 4.6% 0.1 0.1 0.2 0.1. |
USA 3.7% -0.1 0.1. |
Japan 1.4% -0.1. |
Potential Losses to AXA’s Real Estate Portfolio due to Floods and Windstorms Potentially Occurring Once Every 100 Years €Million % of Exposure. |
Floods* Windstorm 2017 2018 2017 2018. |
Belgium 9.5% -2.6 2.0. |
France 31.9% -5.1 6.4. |
Germany 12.0% 7.0 7.8 1.9 1.4. |
Luxembourg 1.0% -0.0 0.1. |
Switzerland 35.9% -5.8 6.7. |
UK 4.6% 0.8 3.1 3.2 1.0. |
USA 3.7% -2.2 0.7 0.6. |
Japan 1.4% -0.7 * As we base our analysis on a market CAT model, some countries, in particular for flood risk, are not covered as they are not in the scope of the model. We are working to improve coverage via internal developments. |
The evolution in our results is explained by both improved geocoded data used by our internal model as well as by the changing composition of our portfolio locations to either “riskier” or “safer” areas. |
25 AXA GROUP 2019 Climate Report June 2019 2. Strategy. |
Green Investments. |
Beside the risk analysis described above, Green investments within AXA’s climate strategy represent a means of facilitating the low carbon transition through emissions savings and intensity reductions, and to encourage various sectors to ramp up their climate strategy. |
After reaching our first €3 billion green investment target in 2017, AXA scaled up its green investment target to €12 billion by 2020, using a broader set of asset classes as well as growing our underlying commitment in each of these asset classes. AXA’s commitment doubles the recommendation from Christiana Figueres, o... |
Green Investments Breakdown. |
To qualify as a green investment, AXA applies the following environmental standards to different asset classes described below: ❯ green Bonds: AXA’s green bonds are externally labelled, notably by the Climate Bonds Initiative as well as ratings agencies which confirm that definitions and use of proceeds are respected. ... |
Defining a “Taxonomy” of Environmentally Positive Activities – A Pathway for an Orderly Transition towards a Sustainable Economy? |
The transition towards a more sustainable economy is probably one of the most important transformation we will ever have tackled as societies and economies. The insurance sector is well placed to play a key role as there is a clear alignment of interests between the insurers, their clients and societies on climate chan... |
AXA adds an extra review to its Green Bonds investments in order to confirm environmental upsides using more stringent criteria. |
Context Box. |
Green bonds Infra. debt Infra. equity Impact Real Estate CRE loans |
26 AXA GROUP 2019 Climate Report June 2019 2. Strategy. |
A Focus on Green Bonds. |
As of 2018, AXA has invested €2.7 billion in green bonds (of which €965 million in 2018), channeling the largest share into the energy sector totaling €1.8 billion. |
The energy sector represents the largest share of global emissions reduction potential, notably through efficiency in the power sector (e.g. smart grids) and a shift to a greater share of low carbon energy sources. Investments in this sector in both developed and developing countries by 2030 will be essential to reach ... |
Green Bond Allocation 35% Renewables 23.5% Green buildings 0.1% |
Other 1.7% |
Water 0.7% |
Land use 24.0% |
Transport |
34.8% |
Renewable energy 8.8% |
Energy eficiency |
4.2% Biodiversity 1.5% |
Adaptation infrastructure 0.5% Waste management 23.5% |
Green Buildings. |
Recent examples include the following: ❯ The Orsted Green Bond financed several energy-related projects. These include three windfarms (two of which offshore), totaling 230 turbines. The offshore windfarms in Germany, to be fully commissioned in 2019, will generate enough electricity to power 460,000 households, and, a... |
A Focus on Real Estate. |
Real Estate assets are a key part of AXA’s green investment target. AXA’s approach is to limit “green” property only to assets with a high level of environmental certification(1) (minimum level “Excellent” or “Gold”) and a minimum Energy Performance Certificate (EPC) rating of “B” or equivalent for non-European assets. |
Examples include: ❯ a newly developed office building in the Paris region with “BREEAM Excellent” and “HQE Excellent” certifications. The building is designed to promote the wellbeing of its occupants with a significant amount of green spaces, indoor gardens and terraces. Tenants can control lighting and temperature th... |
(1) Main Green Building Certifications: Leadership in Energy and Environmental Design (LEED): the most common green building certification worldwide in terms of projects. Building Research Establishment Environmental Assessment Method (BREEAM): the most common green building certification worldwide in terms of countrie... |
€2.7bn Green bonds investments as of 2018 |
27 AXA GROUP 2019 Climate Report June 2019 2. Strategy. |
A Focus on Green Infrastructure Debt and Equity. |
Infrastructure debt and equity provides a unique opportunity for investors to match stable returns with enhanced societal and environmental impact. Infrastructure debt finances the projects required to build, operate and maintain these assets. As governments have limited resources to fund these projects, they present a... |
In addition, we support “transition” infrastructure assets such as clean transportation, energy storage, smart grids, etc., in most of the OECD countries, as well as Asia. Examples include the following: ❯ 465 MW offshore wind farm in Germany, currently under construction (fully operational in 2019), with stable long-t... |
Investing in Developing Countries through the IFC. |
In addition to the above examples, AXA and the IFC, a member of the World Bank Group dedicated to private sector development, launched a $500 million partnership in 2017, supporting an infrastructure fund that will notably finance green infrastructures in emerging countries, including renewable energy, water, green tra... |
28 AXA GROUP 2019 Climate Report June 2019 2. Strategy. |
Impact Investing. |
AXA was one of the first institutional investors to engage proactively in impact investing, an investment strategy that aims to generate objectively measurable and intentional environmental and social impacts alongside financial returns, both integrated into investment management incentives. |
In 2013, AXA committed €200 million to launch its first impact fund (Impact Fund 1) focusing on Financial Inclusion, Access to Healthcare and Education. In 2016 AXA scaled up its contributions by allocating a further €150 million to set up Impact Fund 2, focusing on environmental and social impact. Finally, in May 2019... |
The AXA Impact Funds 1 & 2, in their objectives and outcomes, are “fund of funds” investment vehicles that demonstrate the tangible role AXA and its entities are playing in the achievement of the UN Sustainable Development Goals (SDGs) through the allocation of much needed capital. Our preliminary review of our impact ... |
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