ESG integration and Sustainable bond market
Transcript of ESG integration and Sustainable bond market
ESG integration and Sustainable bond marketAXA Investment Managers
June 2021
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ESG Integration
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AXA IM Core, a global leader in responsible investingESG is fully integrated across our investment processes and embedded within our organisation
RI: Responsible Investment*Source: AXA IM as of 31/12/2020. Non audited figuresSome resources are shared by the entire AXA IM Organization. There is no assurance that any particular individual will be involved in the management of the portfolio for any given period of time, if at all. We do not guarantee the fact that staff remain employed by AXA Investment Managers and exercise or continue to exercise in AXA Investment Managers.
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Founding Member of the Net Zero Asset Managers Initiative
20 yearsof experience in RI
25 Dedicated RI professionals(added to 100 professionals)
A comprehensive & Innovative RI fund
offering(incl. 49 Labels funds)
PRI 2020 Leader Group
A+
Proprietary scoring methodology and
research
20+ yearsof RI experience
€555bn*ESG integrated AUM
(89% of CORE AUMs)
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Source: AXA IM. For illustrative purposes only. AXA IM reserves the right to modify any of the procedures, process and controls described herein at its discretion.*The ESG data used in the investment process are based on ESG methodologies which rely in part on third party data, and in some cases are internally developed. They are subjective and may change over time. Despite several initiatives, the lack of harmonised definitions can make ESG criteria heterogeneous. As such, the different investment strategies that use ESG criteria and ESG reporting are difficult to compare with each other. Strategies that incorporate ESG criteria and those that incorporate sustainable development criteria may use ESG data that appear similar but which should be distinguished because their calculation method may be different.
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• AXA IM Standards• Exclude non ESG-compliant
exposures
ESG Integration based on common foundations3 pillars incorporated across AXA IM Core portfolios
Long-term Investor dialogueProactively engage and vote
AXA IM Sectorial PoliciesResponsible Investment minimum exclusion policies
• Controversial Weapons • Palm Oil• Soft Commodities• Climate Risks
• Severe Controversies• White Phosphorus• Tobacco• ESG Low Quality
ESG Data & ResearchIntegrate ESG data in the research and portfolio construction stages of the investment process
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Ste
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• Qualitative research• Quantitative research & analytics / ESG score
• Robust & measurable voting and engagement • Focus on strategic ESG issues • Engage before risks materialise
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The ESG data used in the investment process are based on ESG methodologies based in part on data provided by third parties, and in some cases developed in-house. They are subjective and may change over time. Despite several initiatives, the lack of harmonized definitions can make ESG criteria heterogeneous. For example, different investment strategies that use ESG criteria and ESG reporting are difficult to compare with each other. Strategies that incorporate ESG criteria and those that incorporate sustainability criteria may use ESG data that appear similar but need to be distinguished because their calculation methods may differ.
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Our Responsible Investing offeringA full range of strategies to help you meet your goals
3 ESG Integration Pillars• ESG score/research used in investment process• Exclusions• Stewardship
ESG Integrated ESG incorporated into the investmentprocess to help achieve risk-adjusted returns
ESG score objective (for some funds) Thematic E/S/G objective and/or UN SDG Objective
ACTInvesting with purpose to support the transition to a more sustainable economy
3 ESG Integration Pillars• ESG score/research used in investment process• Exclusions• Stewardship
Sustainable Bond market
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Green, social and Sustainability bond?A transparent tool to finance environmental or social friendly projects at no additional cost
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ConventionalBond
Transparency
Environmentalor Social benefit
Risk remains at the issuer level
Projects have no directimpact on the performance
Annual reporting withimpact KPIs
Sustainable strategyinsight
Support employment, education and basic needs
Biodiversity preservation, clean energy & energy saving
International Guidelines
ICMA’s Principles and Climate Bond Initiative
Upcoming EU taxonomy and Green Bond standards
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Green, Social and Sustainable Bond marketThere is more than Green Bonds
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Cumulative volume of issuance per year ($bn) Issuance breakdown by sector (%)
Social and Sustainability bond issuance picked up significantly over 2020 mostly thanks to
quasi-sovereign entities
$1,3tn market value
78 Social issuers
126Sustainable issuers
435 Green issuers
22%
63%
15%
Source: AXA IM, Bloomberg as at 31/05/2021 (Green bond market ex CNY, excl. outstanding <$300mio). For illustrative purpose only.
$361bnissuances YTD
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Green Bond marketFrom a niche market to a credible and well balanced alternative to the Conventional bond market
8Source: AXA IM, Bloomberg as at 31/05/2021 (Green bond market ex CNY, excl. outstanding <$300mio). For illustrative purpose only.
Sector Breakdown Currency Breakdown
$842bn market value
A+ Average rating
7,6yduration
435 issuers
0,61%EUR Hedged yield
24,63%
16,23%
24,06%
16,73%
18,35%
Investment approach
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Why invest in Green Bonds?
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Finance the transition to a low carbon economy
Reduce exposure to climate change risks: physical and transition risks
Invest in companies better positionned to seize opportunities in a low carbon economy (Renewable, EVs, Efficient buildings…)
Benefit from highest transparency requirements to track every project funded and quantify their impact
Invest in a very dynamic market segment
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ISSUER’S SUSTAINABILITY STRATEGY
• Overall strategy’s alignment with green bond projects
• Environmental track record and targets
• Meetings with themanagement
• ESG Quality
PROJECT TYPES
• Transparency on projects
• Project greenness
• External certifications
MANAGEMENT OF PROCEEDS
• Financing new assets or Refinancing
• Internal process for tracking proceeds
• Segregated pool of assets
• External verification
IMPACT REPORTING
• Impact indicators reporting commitment
• Pre- and/or Post-issuance
• Relevance of KPIs
• Third party verification
A Dedicated Assessment FrameworkA proprietary process to define and monitor eligible Green investments
Source: AXA IM, for illustration purpose only.11
GO / NO GO
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AXA WF Global Green BondsPortfolio Overview
Finance the Transition towards
a low carbon economy
Transparent and measurable
impact metrics
A global and diversified
solution
• A purist approach that focuses on Green bonds
• 4 environmental themes: Smart energy solution, low carbon transportation,
Green buildings, Sustainable ecosystem
• A dedicated impact report with specific KPIs, and transparency regarding
environmental project financed
• A focus on SDG contribution towards environmental and societal issues
• A wide range of alpha sources from asset and geographical allocation to
term structure management
• A well balanced universe to navigate through market cycles
Robust and disciplined
investment process
• Global and Active Fixed Income process supported by large ressources
• A proprietary Green bond framework and ESG scoring methodology
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AXA WF Global Green BondsIn a nutshell
Performance
Environmental
Benefit
Credentials
6,32%Gross performance
over 2020
2,44%Annualized grossperformance SL
1st Quartile over 3Y, 5Y and SL
-57%
Carbon emission reductionto conventional issuance
63 cars removed
from the road per 1Mln invested
5% of Impact Funds Management fees to be donated to
charities
Source: AXA IM, 31/05/2021
Projects
44,90%
25,50%20%
9,60%
Smart Energy Solutions Low Carbon Transport Green Buildings Sustainable Ecosystem