2022
Article 29 - TCFD combined reportContents
1-

2-

3-

4-

Governance5

1.1 Our Philosophy

5

1.2 Human and Technical Resources

5

1.3 RI Governance Committees

10Strategy

12

2.1 AXA IM Responsible Investment Framework

13

2.2 Climate Strategy

41

2.3 Biodiversity Strategy

47

2.4 Just Transition

52

2.5 Responsible Investment Offering53

2.6 CSR Strategy

63

Risk Management67

3.1 Mitigation of key Sustainability Risks

67

3.2 Factoring Climate Risk in Real Estate Management69

3.3 Internal Controls

73

Metrics75

4.1 ESG Dashboard

75

4.2 Environmental dashboard

77

4.3 Scenario analysis: Global warming scenarios or possible climate futures

79

4.4 Climate scenario, test for the sensitivity of business models to various warming trajectories

81

4.5 Forward-Looking metrics and climate-related impacts for the business83

4.6 Climate Dashboard: A combination of historical and forward-looking metrics

88

4.7 Introducing biodiversity-specific indicators

99

4.8 Disclosure communication

105

4.9 Industry surveys

108

4.10 Focus on our commitments

109

Appendices111

1.Regulatory review

111

2.Thought Leadership

113

3.List of Initiatives, Codes and Principles

114

4.AXA IM climate metrics solutions mix - methodology description at a glance

114

5.B2B Factsheet

118

2Explanation of the report structure
Expanding on its ambition to lead in the Sustainable Finance policy space, expressed as early as in 2015
with Article 173 (VI) of the Energy Transition for Green Growth Act, the French Government goes a stepbeyond in 2022 with the introduction of the Article 29 of its new Energy Climate Law. The newframework maintains and expands expectations in terms of transparency with regards to theintegration of environmental, social and governance (ESG) and climate risks and opportunities ininvestment policy, on-boarding key several concepts from the EU Sustainable Finance Disclosure
Regulation. It goes even further by introducing a requirement to implement strategies to progressivelyalign with the Goals of the Paris Agreement, as well as disclosure requirements in relation withbiodiversity.
The Task Force on Climate Related Financial Disclosures (“TCFD”) was a similar call asking companies todisclose information on climate-related risks and opportunities, this time with a global reach. This
framework continued to evolve in 2021 notably with a view to be more specific in terms of the metrics
to be reported, as well as to further encourage reporting entities to define and publish detailedtransition plans.
These initiatives have had a major impact on investors, asset managers but also issuers more broadly,
and the TCFD serves as a central framework in our regular interactions with companies. This reportaims to provide an overview of AXA IM’s approach to Sustainability and adheres to the TCFD’s generalguidance for the financial sector. In 2022, we have added more details with regards to our biodiversity
and net zero strategies.
It aims to address the French Article 29 of the Law Energy-Climate regulatory requirements1. We arealso working on the implementation of SFC and FCA upcoming regulations, to which this report alreadypartially complies. The Hong Kong regulator (Securities and Futures Commission "SFC") has also issued
the Consultation Conclusions on the Management and Disclosure of Climate-related Risks by FundManagers. We are under the final stage of implementation and this report addresses some of the SFC
requirements.

1 Worldwide holdings include the assets managed by AXA IM Paris.

32021 Review
2021 was marked by several regulatory developments which guided our Responsible Investment (RI)
activities and mobilized AXA IM’s teams efforts:•••

The entry into force of the EU Sustainable Finance Disclosure Regulation (“SFDR”) 2 level 1
requirements in March 2021, a disclosure framework aimed at ensuring an appropriate
integration of sustainability risks in investment decisions, as well as sufficient and comparable
information depending on the level of ESG integration;
The entry into force of the “2020-03 position-recommendation” of the AMF Doctrine in France
in March 2021, regulating extra financial disclosures for products distributed in France to retailinvestors;
The publication of the Article 29 of the French Energy-Climate law (“Article 29 LEC”) in May
2021, requiring financial institutions to strengthen their Climate and Biodiversity strategy byJune 2022 and the publication of the EU Taxonomy Delegated Acts in July 2021, requiring
financial institutions to include disclosures in prospectus on how funds take into consideration
the environmental objectives (only climate change mitigation and adaptation for 2022) of the
EU Taxonomy and to what extent.

Along with the preparation for these regulatory developments, the COP26 climate change conference
held in Scotland in November 2021 was a pivotal moment in the journey on the fight against climatechange, five years after the COP21 where Paris Agreements have been signed3. The ambition of thisglobal meeting was to implement Paris Agreements’ goals by encouraging states to raise their climate
ambitions and make new commitments. The private sector, including financial firms must support
countries in their ambition by re-directing financial and investment flows into climate-friendly andresilient technologies and secure global net zero.
• After joining the Net Zero Asset Managers initiative in December 2020, we worked on our first
Net Zero target released in October 2021, and subsequently updated in April 2022.
Our desire to be a transition leader requires us to be clear on red lines – practices or activities which
we do not think can be part of the transition to a more sustainable world. We therefore worked in
2021 on the reinforcement of our policies, considering the developments listed above.
• Our Palm Oil policy was extended to a more comprehensive Ecosystem Protection andDeforestation policy and we reinforced our ESG Standards policy with additional exclusions on
Human Rights and International Norms and Standards violations. This work continues as
illustrated by the publication of our strengthened Climate Risks policy early 2022.
• Stewardship strategy is another key element of our RI framework on assets and activities on
which we remain exposed. Climate remained our main theme of dialogue, but there was alsoa clear increase in the proportion of corporate-governance-related engagements against 2020
levels. This reflected the trend towards the integration of ESG across companies’ businessactivity and organisation as they pursue genuinely effective ESG strategies. Ecosystem
protection and human capital were key engagement themes too.
Finally, we are committed to providing transparency on the integration of ESG criteria at fund level.
While we released an Engagement report at fund level in the first half of 2021, we continue to work on
the improvement of our existing ESG and Voting reports offering.
2 EUR-Lex - 32019R2088 - EN - EUR-Lex (europa.eu)
3 The COP26 has been postponed by one year due to COVID-19 global pandemic.

4

1- Governance
1.1 Our Philosophy
AXA IM has been involved in responsible investment for more than 20 years and is actively engaged inprogressively incorporating Environmental, Social and Governance (“ESG”) factors into each area ofmanagement expertise, and in the development of a range of responsible- and impact-investment
products.
We believe that ESG factors can influence, not just the management of investment portfolios across all
asset classes, sectors, companies and regions, but also a range of interests affecting clients and otherstakeholders.
Our investment philosophy is based on the conviction that sustainable development issues are a major
concern for the coming years. We believe that combining fundamental ‘non-financial factors’ withtraditional financial criteria will help us build more stable portfolios that perform better over the longterm. The non-financial approach has become a necessity in more ways than one:•••

It is instrumental in removing companies and investments from portfolios when they cause
exposure to high levels of ESG risk, which would ultimately affect financial performance
It focuses on companies and investments that have implemented best practice regarding
managing their environmental impacts, governance and social practices, and whose responsible
practices leave them better prepared, in our view, to meet the major challenges of the future
It may support improved performance by means of active dialogue with companies on
managing ESG concerns around investments and limiting our clients’ exposure to reputationalrisk

AXA IM’s responsible investment framework, policies and processes are built to consider both impacts,
at varying degrees depending on the level of integration of our products – in line with the principles of
the EU Sustainable Finance Disclosure Regulation.

1.2 Human and Technical Resources
Human Resources
The Responsible Investment (RI) capabilities are, since 2020, embedded within AXA IM’s two business
units, Core and Alts. RI is now embraced by all investment teams which perform RI-related activities aspart of their day-to-day. AXA IM Core and Alts teams work collaboratively in the implementation of AXA
IM’s RI Strategy described in this report, notably to reach net zero greenhouse gas emissions by 2050
across all assets under management.

5

AXA IM CoreAXA IM has invested significant resources into recruiting RI experts and analysts who work with ourinvestment teams to integrate ESG issues into their investment processes. The range of backgrounds
includes fund management, sell-side research, quantitative analysis, strategy and project management,in addition to relevant RI experience; ensuring that RI issues are integrated using an investment-relevant
approach. In total, 29 employees are involved at full-time in RI / ESG activities. There are otherprofessionals who are not included but whose ESG work is embedded in their day-to-day routine.
More specifically, the RI research capabilities were organised as follows in 2021, within AXA IM Core:
RI Experts teams:•

A RI Coordination and Governance team responsible for coordinating the definition of the
Sustainability roadmap and for steering transversal RI projects. The team is also in charge of researchand engagement on corporate governance topics and develops and implements our voting policy on
key themes mentioned above. The Active Ownership strategy is built and led jointly with the RI
Research team. This team also helps to ensure consistency between the different business units of
AXA IM in their approach to sustainability.

•

A RI Research team responsible for thematic research with a focus on climate, biodiversity, humancapital & diversity as well as data privacy, ensuring it translates into implementable investment
decisions across platforms. This team also leads shareholders engagement on those themes. Within
this team, dedicated RI Analysts are in charge of defining the eligible Green, Social and Sustainability
bonds universe. They rely on our proprietary framework notably inspired by the Green and Social
Bond Principle (GSBP) and the Climate Bonds Initiative (CBI) Standards.

•

An ESG Research and Impact team responsible for conducting ESG and Impact analysis at company
level, working closely with fund managers. Dedicated Impact Analysts perform qualitative impact
analysis on companies based on five key pillars, reviewing their products or services and operational
activities to demonstrates whether a company contributes to the Sustainable Development Goals or
to a specific outcome.

•A RI Solutions, Tools and Models team dedicated to the development of ESG quantitative solutions.
As such, the team has developed a proprietary ESG framework and RI Search platform, providing
portfolio managers and analysts with ESG raw quantitative data, KPIs, internal and external researchand proprietary ESG scores.

RI champions within the business:•

RI Champions within investment teams in charge of coordinating RI-related projects within theirinvestment platform, of the integration of ESG criteria in decision-making process, supporting
investment teams on RI-related topics and make the link between RI-dedicated teams andinvestment teams.

•

ESG product and quantitative specialists within the Investment Specialist and Quant Lab teams
oversee respectively product and business development activities and support the integration of ESG
criteria and RI approaches within portfolio construction and decision-making processes.

In addition to these teams, c. 9 employees from Operational functions within Core and within the Global
COO department are fully dedicated to ESG, to ensure the adaptation of our operational and IT
framework to ESG integration and proper level of oversight from control functions.

AXA IM Alts
In addition to the breadth of Responsible Investment experts embedded within the asset managementbusiness to provide thematic research, coordination and governance, AXA IM Alts has a dedicated teamof experts to support investment teams in identifying and managing ESG related risks and opportunities
specific to Alternative asset classes.
•

Sustainability analysts: a dedicated team of 7 experts supports the Real Estate and Infrastructurebusinesses through the specific research and analysis of portfolio performance, climate related risk
and reporting in addition to day-to-day support for all investment teams.

•

AXA IM Alts also relies on 5 Regional ESG Leads who oversee the integration of ESG across real estate
assets in geographies they cover by leading sustainability related projects.

•

Dedicated Impact Investing team of 6 investment professionals which analyses and selects impact
projects in alternative assets such as private equity, venture capital, private debt, real assets andproject finance with the aim to address the needs and aspirations of underserved people globally
while protecting natural environment and contribute to the UN SDGs.

Finally, AXA IM has a dedicated Corporate Responsibility team, guided by the three pillars of ESG:
Environment, Social, and Governance. We actively engage with all areas of the business to explore
opportunities to push for progress on our key pillars to ensure we walk the talk, and do ourselves thatwhich we ask of others. We also benefit from our parent AXA Group, which is a leading industry voicefighting for progress on topics such as climate change and social inclusion.

ESG Objectives and Training
Our employees are regularly trained on ESG and RI through internal and external training.
•••

An ESG Academy was launched in 2020 to support the ESG upskilling of employees - relying on ESG
Certificate from the Chartered Financial Analyst (CFA) Institute and the Certified ESG Analyst(CESGA) from the European Federation of Financial Analysts Societies (EFFAS).
Expanding the programme in 2021:▪ We delivered workshops to upskill our employees on ESG and climate, including a
Masterclass in Net Zero, a course on ESG Fundamentals as well as a course on ESG for Real
Assets.
▪ AXA Group launched the AXA Climate Academy programme to help employees better
understand the basic science of climate, understand the role AXA must play and empower
individuals to commit to change. This programme becomes mandatory in 2022 for all
employees.
In addition, RI experts organise ongoing training on ESG issues for AXA IM staff. These sessions cover
AXA IM Sustainability approach (e.g. Net Zero commitment and methodologies, scoring
methodologies, engagement and voting activities).

ESG and responsible investment considerations are included in the appraisal process of different teams
including Responsible Investment dedicated teams. Since 2018, all heads of investment platforms have
ESG objectives included in their target letter. Portfolio managers who are involved in the managementof ESG assets have related objectives. In 2021, sustainability risks (an environmental, social or
governance event or condition that, if it occurs, could cause an actual or a potential material negative
impact on the value of an investment) have been integrated into the Remuneration Policy, in line withregulatory evolutions. From January 2021, individual objectives for investment teams include elements

related to the sustainability risk framework and updated investment processes include the monitoringof these risks.

Technical resources
The RI Solutions, Models and Tools team bases its analysis models on a range of internal and external
data sources: ESG-rating agencies, broker research, and company and press publications. In 2021, AXA
IM spent more than €2,2 million euros in third-party ESG-related product and services, including ESG
data.
SUPPLIERS

STRENGHTS / EXPERTISE

ADDED VALUE

Scores andResearch

Raw Data
and KPIs

MSCI

Leader on corporate and sovereign
ESG rating with a strong trackrecord and expertise on climate
analysis for corporates

ESG and climate research✓✓

Vigeo-EIRISStrong expertise in social issues andEuropean small & mid cap

Methodology
basedon
analysing stakeholders from theleadership, implementation, andresults perspectives✓✓

Sustainalytics

Controversies analysis /exposition to some activities andcompliance with internationalnorms

Controversies and reputational
risks

✓

✓

EthifinanceStrong expertise on European microand small caps

ESG ratings used for Leverageloans and private debt asset
classes.

✓Bloomberg

Full range of ESG services

ESG KPIs used for investment
and reporting purposes.

✓

ISS - Ethix

Offers expertise across a full rangeof ESG issues

Ethical filters and controversial
weapons✓

ISS - Oekom

Expertise in Impact analysis

Impact research and UN SDG
alignment assessment✓

Trucost

Full
range
of
quantitativeenvironmental and social key
performance indicators (KPIs) –including SFDR PAIs – and taxonomy
alignment metrics4

Full range of quantitativeenvironmental KPIs, SFDR PAIs
andtaxonomyalignment
metrics

Beyondratings

Expertise in Climate analysis

Climate research for Sovereign
assets✓✓Carbone 4

Offers a climate risk package

Measures the carbon impact ofinvestments

✓

✓

✓

✓

4 “SFDR PAIs” refers to Principle Adverse Impacts under the EU’s Sustainable Finance Disclosure Regulation

Iceberg DataLab
I Care &Consult

Measurementofinvestors’
investments impact on biodiversity

These two data providers joined
forces to develop metricquantifying companies’ impact
on biodiversity and nature tohelp investors integrate this intorisk assessment and research

Urgewald(NGO)

Coal, oil and gas research

Coal, oil and gas research with
GCEL and GOGEL

✓

✓

✓

To adapt to the ongoing evolution of market practices (whether regulatory or client driven) that are
more and more demanding in terms of ESG assessment, AXA IM constantly monitors and refines ESG
methodologies and accordingly adapt the tools provided to portfolio managers to achieve advanced
ESG integration.
To do so, we monitor the quality and service offerings of all ESG data providers in the market, andregularly interacts with them to understand and challenge when necessary methodologies and relatedchanges. As investors, we seek the best information possible, which requires using different ESG
providers leveraging their strengths on specific areas.
In terms of challenges, the following points can be noted:••

Methodologies are still in the works, and complex (e.g. climate / alignment). ESG data relies on thesemethodologies, and is therefore subject to changes, and to challenge. This makes it more difficult
to integrate in the investment decision than a traditional financial information, based on well-know
and shared standards.
Lack and cost of ESG data – although initiatives to encourage issuers to report in a morehomogeneous, transparent, and usable manner are multiplying (TCFD on climate data, Workforce
Disclosure Initiative on social data, etc.), ESG data remains heterogeneous and therefore
complicated to use when investing and reporting. We encourage initiatives at the European and
Global level to reinforce the availability of ESG information at issuer level, but also to make itavailable in an easy and less costly manner. AXA IM supports initiatives aimed at ensuring
convergence and cooperation at global level, to develop standardized, mandatory ESG data. We
support the work of the EFRAG taskforce as part of the CSRD preparation, and advocate forconvergence including via our participation to SASB Investor Advisory Group.

Concrete example of the selection of a data provider
To fulfil Sustainable Finance Disclosure regulation (SFDR) introduced in 2019 including
the disclosure of the Principle Adverse Indicators (PAI) and EU Taxonomy data, AXA IM had to choose
a provider to report these data. To identify the best provider in terms of coverage, data quality andcost, AXA IM sent a Request for Proposal (RFP) to 10 different providers. At the time the RFP waslaunched, the SFDR RTS and the Taxonomy Regulation were not finalized.
As AXA IM manage assets in Developed and Emerging market and from different asset classes suchas Equity, Sovereign and Corporate Debt, the providers to which the request was sent had to be able
to have a coverage wide enough in terms of asset classes and geographical zones.

To make the best possible choices, strengths and weaknesses of each data providers where reviewed
and compared to determining factors such as coverage, data quality, alignment with sustainabilityrelated regulations, calculation methodologies and level of transparency on these methodologies,
update frequency and cost.

1.3 RI Governance Committees

Source: AXA IM, as of 31/12/2021. For illustrative purposes only.

Committee

Role

AXA IM Sustainability Strategic
Forum and Management Board•

The AXA IM Sustainability Forum was launched in January 2021 and is led by our
Executive Chairman, Marco Morelli. The Management Board was ultimately
responsible for the definition and oversight of our Sustainability strategy.

•

From 2022, this Forum will become the Sustainability Strategic Committee attended
by all members of our Management Board, as well as selected Sustainability experts,
and held quarterly. This is where we will shape our vision and agree our ambitions forsustainability at AXA IM, across responsible investing and corporate responsibility.

•

Leading body in charge of proposing AXA IM’s strategy with regards to Responsible
Investment and monitoring its delivery•

This notably includes the definition of sectorial policies and RI product framework as
well as piloting efforts on selected themes such as climate change and biodiversity

AXA IM Corporate Responsibility
Committee••

Define AXA IM CR strategy, taking into AXA Group strategy, with concrete roadmap

AXA IM Corporate GovernanceCommittee•

Provide strategic oversight of AXA IM’s corporate governance, stewardship andvoting activities in relation to investee companies and ensuring clients’ rights andobligations are exercised in a manner consistent with good practice standards

AXA IM RI Strategic Committee

Animate a community through communication and business actions

•Ensure views developed on ESG risks and opportunities, from exclusion to
engagement topics are discussed collegially, considering possible implications for AXA
IM•

Facilitate coordination between various stakeholders in the implementation of theengagement strategy•••

Act as a gatekeeper of AXA IM exclusion policies

AXA IM ESG Scoring andQuantitative methodologies
Committee•••

Ensure coordination of ESG integration in a more operational manner

AXA IM Core Listed Impact
Committee••

Review and Validate proposal of Listed Impact funds

AXA IM ESG Monitoring andEngagement Committee

AXA IM Alts Steering Committee •(RI, Equity Investments ESG, Debt
Investments ESG)

Oversee the ESG scores override process (“ESARC”)
This committee also looks after thematic issues, including climate and biodiversity
related topics.

Discuss industrialization topics
This committee also looks after thematic issues, including climate-and biodiversity
related quantitative topics.

Build and promote AXA IM view on Impact in Listed Asset Classes
Endorses the AXA IM Alts RI Strategy, implements and monitors ESG methodologies,scores and RI processes for both Equity and Debt Businesses

Oversight Committees•

To provide formal oversight of the investment activity at expertise level as part of the
Front Office controls achieved through review of reports (see below) presented to theCommittee. ESG indicators are reviewed as part of this.

AXA IM Core Investments Investors •Committee

Discuss and decide on the main issues raised by the Investment Oversight Committees(backwards perspective)•

Discuss and decide on evolutions in investment strategies and processes, and inmanage, share and leverage Research capacities and outputs (forward perspective)•

Review investment performance & risk indicators (including ESG indicators)

AXA IM Investment OversightCommittee (Fixed Income,Framlington, Multi-Asset)

As part of the reorganisation of the Responsible Investment and Corporate Responsibility activities
undertaken by AXA IM’s Management Board in 2020, the governance structure will change in 2022 withsignificant enhancements to continue to embed ESG within AXA IM Core and AXA IM Alts business units.
This new organisation will allow AXA IM to redefine and strengthen its RI Strategy, covering both listed
and alternative assets classes, improve collaboration and synergies between the two business units andbetter consider specificities of each asset class, and ensure alignment with our own Operations andPractices through a joint work with the CSR team.

2- Strategy
In this section we describe our ESG, Climate and Biodiversity strategies as well as key 2021 updates. We
provide details on ESG scoring methodologies which are part of our AXA IM RI Framework. Climate andbiodiversity metrics and methodologies which are mostly used for reporting purpose are described in
the section 4 – Targets and Metrics.
At AXA IM, we believe the financial industry has a key role to play in the fight against climate change
and the move to more sustainable economies, which guides our Responsible Investment strategy androadmap. The participation of the financial sector to achieve global sustainable objectives is one of the
key pillars of political action plans to achieve climate-neutral economies – as expressed by the European
Union with its “double-materiality” approach.
In that perspective, 2021 was marked at AXA IM by:••

The implementation of major Sustainable Finance policies aimed at channelling financial flows
into products which support the transition to a greener and more sustainable world, throughgreater transparency and accountability. We continued to adapt and reinforce our approaches
in this perspective, while regularly exchanging with policymakers, supervisors and peers,
including through our participation to the newly created IIGCC policy steer-group which AXA IM
co-chairs and to the Eurosif SFDR advisory group. These exchanges aimed at helping to ensure
short-term implementation challenges (incl. lack of comparable data reported by issuers,
concepts subject to interpretation in the policies leading to heterogeneity in implementation,etc.) could be solved effectively to enable the achievement of the long-term ambition of those
new policies. Raising awareness and supporting education on sustainable finance topic
continues to be a key focus for AXA IM in that perspective.
The work done to define our Net Zero target, methodologies and implementation approach,following our decision to join the Net Zero Asset Managers (“NZAM”) initiative in December
2020, and in preparation for Article 29 LEC.

Those two major changes led us to continue to evolve our RI policies and framework in 2022, as
described in this report. We have combined in this section the information related to our strategy withregards to ESG, Impact, Climate, Biodiversity, as well as key metrics.

Source: AXA IM as at 31/03/2022. (1) Principle for Responsible Investment. RI = Responsible Investment ESG = Environmental,
Social, Governance (2) In-house RI Platform (3) awarded by the Environmental French Ministry in 2016. References to league
tables and awards are not an indicator of future rankings in league tables or awards. (4) Source Novethic Launched at the endof 2015 following the COP21 by the French Ministry of the Environment, Energy and the Sea, the “Transition Energétique etEcologique pour le Climat” label (Energy and Ecological Transition for Climate) helps to comply and fulfil a fund’s commitment

to financing the green economy. The Environment Ministry sets out the share of green activities to be held to claim the label.
references to league tables and awards are not an indicator of future rankings in league tables or awards. Information containedin this document may be updated from time to time and may vary from previous or future published versions of this document(5) based on AXA IM’s methodology, (6) before the 3rd of August 2018, the strategy was Planet Bonds strategy

2.1 AXA IM Responsible Investment Framework
AXA IM’s RI Framework is organised around three pillars:
ESG Quantitative and Qualitative Research
2. Exclusion policies
3. Stewardship policies
1.

2.1.1 ESG Quantitative and Qualitative Research
ESG Scoring Methodologies
We use ESG scoring methodologies to help portfolio managers integrated ESG considerations in theirinvestment decisions. ESG scoring methodologies rely on data reported by companies which are still
heterogenous due to the absence of global, mandatory sustainability reporting standard which mean
they should be used with caution. Through our advocacy efforts, we support the on-going developmentin the sustainability-reporting space, including at EU level with the revision of the CSRD and at global
level with the work of the ISSB, and in particular advocate for a proportionate integration of the doublemateriality principles.
Some of our strategies apply binding criteria in relation with the ESG score, which are described in theirregulatory documentation.

2021 updates
In 2021, we have improved our ESG Scoring methodologies for traditional asset classes as follows:• Early 2021, we have consolidated our Corporate ESG scoring methodology to improve thecoverage on small and mid-caps. Thanks to EthiFinance, specialised on the ESG Scoring of SMEs
and mid-size companies listed on European markets, and their Gaïa database, we are able tocalculate an ESG score for more than 300 additional companies.
• Since March 2021, we deployed the issuance bonuses’ process already applied to green bonds
to social and sustainability bonds. For Sustainability bonds, the bonus is distributed between
the E and S pillars based on the Green and Social share of the bond.
• In November 2021, we have strengthened our ESG scoring methodology. Previously, we
combined data from three providers, but we have now adopted a single-provider ESG scoringmodel which is coupled with an overlay of AXA IM’s own analysis. Entitled Q², this new andenhanced qualitative and quantitative approach offers increased coverage as well as fine-tuned
fundamental analysis.

Description of ESG scoring methodologies
ESG Scoring methodology for Listed Assets
In 2021 AXA moved from a “blended score” which was an aggregation of KPIs from different providers
to a structured scored called Q². Q² stands for Qual and Quant.

Source: AXA IM, as of November 2021. For illustrative purpose only.

Using MSCI ESG scoring model as the starting point, Q² methodology allows to increase the coverage
provided by MSCI as when MSCI doesn’t provide a rating for an issuer, AXA IM ESG analysts can provide
a documented, fundamental ESG analysis, which in turn will be transformed into a quantitative ESG
score following MSCI pillars aggregation methodology and scores normalization, such coverageenhancing ESG scores are referred to as “qual-to-quant”. In 2021, we created 247 ESG Scores based ona qualitative analysis.
Second, when MSCI does cover an issuer but AXA IM’s ESG analysts disagree with MSCI’s ESG
assessment (for example because the assessment is based on scarce and/or outdated data), a
documented, fundamental ESG analysis can be submitted to the peer review of the ESG Assessment
and Review Committee (ESARC), chaired by the Head of AXA IM Research; if the ESARC validates theanalysis, it will be transformed into a quantitative ESG score and will override the existing, previously
prevailing MSCI score. In 2021, 34 scores have been corrected through this ESARC process.
Third, in the fixed income space, Q² will keep an instrument-level differentiation in ESG scores with a
ESG score premium for sustainable bonds (green and social bonds) for which AXA IM’s analysts (in RI
Research) have a documented, fundamental positive or neutral opinion.
Finally, AXA IM will keep “cascading” ESG scores from root issuer to its affiliates after and beyond what
MSCI does in this respect.
MSCI scores are used as a starting point, for corporates and for sovereigns, which enables Q² to provides
consistent ratings between the two asset classes. MSCI scores range from 0 to 10.
▪

Corporate ESG Ratings Methodology

Key issues are industry-specific environmental, social and governance externalities that may impact a
company or industry. MSCI identifies 35 Key issues within the three ESG pillars comprising 5-30% of thetotal ESG Rating:

•
•

•
•

•

•

•

•

To arrive at a final ESG Rating, the weighted average of individual Key Issue Scores is normalized
relative to MSCI ESG Rating Industry peers.
The weightings consider both the contribution of the industry, relative to all other industries, to thenegative or positive impact on the environment or society; and the timeline within which we expectthat risk or opportunity for companies in the industry to materialize.
The framework is such that a Key Issue defined as “High Impact” and “Short-Term” would beweighted three times higher than a Key Issue defined as “Low Impact” and “Long-Term”.
Level of contribution to social or environmental externality: Similar to the process outlined above,
each GICS (Global Industry Classification Standards) Sub-Industry is assigned a “High”, “Medium”,
or “Low” impact for each Key Issue based on MSCI analysis of relevant data (e.g., average carbon
emissions intensity).
Expected time horizon of risk / opportunity: The time horizon of each Key Issue (Short-Term,
Medium-Term, Long-Term) is classified based on the type of risk or opportunity that each Key Issue
presents to companies.
The Governance Pillar weight has been determined assuming a “High Contribution/Long Term” and“Medium Contribution/Long Term” assessment on Corporate Governance and Corporate Behavior
respectively across all sub-industries. Additionally, the weight on the Governance Pillar will be
floored at a minimum value of 33%.
The Risk Exposure Score and Risk Management Score are combined such that a higher level of
exposure requires a higher level of demonstrated management capability in order to achieve thesame overall Key Issue Score.
A controversy penalty if it is judged to pose material risks can be applied to the Key issue Score. A
controversy case that is deemed to indicate structural problems that could pose future material
risks for the company triggers a larger deduction from the Key Issue Score than a controversy casethat is deemed to be an important indicator of recent performance but not a clear signal of futurematerial risk.

Climate Change (Carbon Emissions, Product Carbon Footprint, Financing Environmental

Environmental

Impact & Climate Change Vulnerability)

Natural Capital (Water Stress, Raw Material Sourcing & Biodiversity and Land use)
Pollution & Waste (Toxic Emissions and waste, Packaging Material and Waste & Electronic Waste)
Environmental Opportunities (Opportunities in Clean Tech, Green Building and Renewable
Energy)Human Capital (Labor Management, Health & Safety, Human Capital and Development, Supply
Chain Labor Standards)

Product Liability (Product Safety & Quality, Chemical Safety, Financial Product Safety, Privacy &SocialData Security, Responsible investment, Health & Demographic Risk)

Stakeholder Positions (Controversial Sourcing, Community Relations)Social Opportunities (Access to communications, to Finance, to healthcare, and Opportunities in
Nutrition and in Health

GovernanceCorporate Governance (Ownership & Control, Board, Pay and Accounting
Corporate Behavior (Business Ethics, Tax transparency)

Source: AXA IM, MSCI, 2021.

▪ Small and mid caps
To complement our corporate methodology for specific asset classes as small and mid-caps, we
expanded our coverage in partnership with Ethifinance. It relies on 45 raw scores sourced from
Ethifinance & Trucost, all rated on a scale from 0 to 10 and classified in 6 factors and 13 sub-factors. The
sectorial weighting replicate MSCI ‘s one.

This expansion allows the ESG coverage of the funds targeted to improve significantly.
▪

Sovereign ESG Ratings Methodology

27 Key issues within the three ESG pillars:
•

•
•

•

•

The MSCI ESG Government Ratings reflect how countries’ exposure to and management ofenvironmental, social, and governance risk factors may affect the long-term sustainability of theireconomies.
The weight of an ESG pillar is determined after assessing the impact of that pillar on the long-termcompetitiveness over the short, medium and long term.
Expected time horizon of risk / opportunity: time horizon of each Key Issue (Short-Term, MediumTerm, Long-Term) is classified based on the type of risk or opportunity that each Key Issue presents
to the countries.
The Governance Pillar weight is assigned a higher weight (50%) than the Environmental and Social
pillars (25%) as governance offers the most dynamic ways to influence the management ofenvironmental, social and institutional risks.
The Risk Exposure Score and Risk Management Score are combined such that a higher level of
exposure requires a higher level of demonstrated management capability in order to achieve thesame overall Key Issue Score. Within this approach, a country’s Government ESG score isconstrained by its risk management score

Natural Resource Risk

Environmental

Risk Exposure: Energy Security Risk, Productive Land and Mineral Resources, Water Resources
Risk Management: Energy Resources Management, Resources Conservation, Water Resource
Management

Environmental Externalities and Vulnerability Risk
Risk Exposure: Vulnerability to Environmental Events, Environmental Externalities
Risk Management: Environmental Performance, Management of Environmental Externalities

Human Capital Risk
Risk exposure: Basic Human capital, Higher Education and Technology Readiness, Knowledge
CapitalSocial

Risk Management: Basic Needs, Human Capital Infrastructure, Human Capital Performance,

Economic Environment Risk
Risk exposure: Economic Environment
Risk Management: Wellness

Financial Governance Risk
Risk Exposure: Financial Capital and Trade Vulnerability

GovernanceRisk Management: Financial Management

Political Governance Risk
Risk Exposure: Institutions, Judicial and Penal System, Governance effectiveness
Risk Management: Stability and Peace, Corruption Control, Political Rights and Civil Liabilities

Source: AXA IM, MSCI, 2021.

▪

Green, social and sustainability bonds

A specific methodology for green, social and sustainability bond has been designed to include the bonds’
qualitative assessment made by the RI Research team into the Q² scoring frameworks. The scores
integrate these qualitative inputs, whether it is a corporate or sovereign bond, to produce an enhanced
ESG score for green, social and sustainability bonds issuances.
Thus, the scores given to these instruments are a combination of both quantitative and qualitative
assessments. The ESG score of the bond can either be the same as its issuer, or get a bonus dependingon the qualitative assessment.
It allows us to differentiate these impact bonds from common bonds through ESG scoring and to favour
investments participating in climate and social transition.

ESG-rating methodologies for Alternative Asset Classes▪

Direct Property
The ESG rating methodology for real estate assets has been developed around 3 pillars: Environmental(E), Social (S) and Governance (G), each covered by dedicated indicators. The assessment is linked tothe performance of a building over a defined period and therefore takes into account criteria that canbe measured at the asset level. All E, S and G components are linked to the building itself or to its
management method and are defined in such a way as to allow the evaluation of any type of physicalreal estate asset, regardless of its asset class (residential, office, hotel, etc.).
The ESG rating grid is a proprietary tool, initially developed in 2016, in line with various sectoral
benchmarks, such as BREEAM in use and GRESB, in order to integrate the expectations of the mainstakeholders and to guarantee the coherence of the actions carried out at asset level. This rating gridhas been further developed during 2021 to more fully integrate new risks (eg. climate related risk), andto more clearly reflect evolving impact indicators.
A user guide accompanies the grid to explain each of the criteria and sub-criteria to ensure consistentuse by asset managers. The rating has been developed to address the specificities of all real estate asset
classes and their geographic locations, and takes into account all uses per asset, beyond the data andinformation for which AXA IM Alts, which encompasses the activities of AXA REIM SGP, exercises
operational control.
The rating out of 200 (reduced to a score out of 10) takes into account a weighting of each criterion
according to the importance of the issue in relation to AXA IM Alts' ESG policy and the manager's levers
for action, while respecting the requirements of the SRI label. In line with AXA IM Alts' ESG strategy,
environmental criteria play a predominant role in the rating, representing 60% of the total score. Socialand governance criteria represent an equivalent weighting of 20% each.
The new ESG scoring grid has a total of 27 questions, 25 of which are scored, for a total of 200 points.
The final score is calculated out of 10. In total, 12 new questions have been added compared to theprevious grid and 2 questions have been deleted or substantially changed. Some themes have been
added (e.g. climate resilience, impact on local communities, biodiversity), to reflect the growing
importance of these themes in AXA IM Alts' sector benchmarks and stakeholder expectations. The
questions also require more precise answers (e.g., details of measures in place in the building) to allow
for more accurate monitoring and reporting over time.

Source: AXA IM, 2021.

A preliminary ESG score is calculated at the time of acquisition, noting that many assumptions may bemade as data availability is usually limited. Once under management, asset managers are responsible
for undertaking an annual review and update of the ESG score for the asset within our dedicated ESG
data management platform. This assessment forms the basis of the asset level ESG action plan, andspecifically identifies activities and initiatives to address asset level sustainability risks and principal
adverse impacts as part of our active approach to asset management. For Joint Ventures these internal
ESG assessments further inform our engagement with partners and tenants.
Note: for quantitative questions related to energy (electricity, gas, district heating) and water
consumption, the grid uses actual consumption data collected by the property managers in the data
management platform to measure these environmental indicators.
▪ CRE Debt and Infrastructure Debt
For the asset classes of commercial real estate (CRE) debt and infrastructure debt, non-financial criteria
are taken into consideration during the due diligence and investment committee process. A scoring
methodology specific to these two asset classes was developed in 2016 for the purpose of allocating
an ESG score. In 2022 these rating tools are under review and will evolve to reflect the changing risks
and impact indicators for each sector.

For CRE Debt, the methodology developed reflects the approach in place for real estate, analysing key
criteria of the underlying real estate assets to determine relative ESG performance. Analysis of theunderlying asset is complemented by an assessment of loan sponsors, the ultimate owners of theunderlying asset, based on their publicly available commitments and policies in relation to ESG.
The ESG assessment has a total of 14 indicators (5 for the underlying asset and 9 for the loan
sponsor(s)). Each indicator has a list of possible responses allowing us to determine a score. The
assessment of underlying assets relies on information and data provided during the underwritingprocess, while the review of sponsors relies on public information disclosed by the sponsors regarding
their commitments to ESG.
Due to the nature of investment class (i.e. debt) there are limitations as to the ability to effect change
in the underlying asset performance. However, to actively manage the level of sustainability risk withina portfolio, the teams review changes in coverage of certifications with public databases, as well as andchange in loan sponsor commitments.

Source: AXA IM, 2021.

For Infrastructure Debt, the ESG assessment has a total of 33 indicators. We require that borrowers
provide comprehensive technical and environmental data to enable us to properly assess theinvestment. The indicators reviewed are based on the project sector, social utility, environmental
impact and ESG commitments of shareholding companies.

Source: AXA IM, 2021.

To assess the environmental and social score of the transactions, our investment teams will take into
account:•••

The category of the project (eg. Renewable energy, energy grids, transport, telecom etc.)
Specific covenants related to environmental matters
Specific environmental risk in the due diligence process (biodiversity risk, water risk etc)

•
•
•
•

Certification of the project by a recognized entity (BREEAM New Infrastructure, CEEQUAL, SuReetc.)
Environmental risks and opportunities aligned with the Climate Bond Initiative
Environmental & Social risks and opportunities via alignment with UN SDGs
Specific health and safety risks

To complement the project E and S performance, indicators for the S and G components also consider
the following for the project shareholders:•••Public charter engagement (UN PRI signatory, UNGC signatory)
Compliance analysis (KYC and AML screening, World Check database screening)
Participation in ESG initiatives (Sustainability policy, GRESB participation, public membershipassociation)

These indicators help to determine the overall ESG score of the project which serve as informative
indicators of underlying ESG performance and sustainability risk.

▪

Infrastructure equity

For the asset class of infrastructure equity, non-financial criteria are taken into consideration during
the due diligence and investment committee process as well. A scoring methodology specific to thisasset class has been developed for the purpose of allocating an ESG score.
The ESG assessment has a total of 15 indicators. Each indicator has a list of possible responses allowing
us to determine a score. Our ESG evaluation accounts for criteria based on project’s sector
categorization under the Climate Bonds Initiative (CBI) Taxonomy and the draft EU Taxonomy, including
any specific environmental impacts. In addition, we assess the ESG commitments of shareholding
companies or partners and review performance against specific indicators such as Health and Safety,
Board gender diversity and compliance with the OECD Guidelines on Multinational Enterprises.
Investment specific performance targets which are aligned with the above assessments areincorporated into the active management of direct equity infrastructure investments.

▪

Leverage loans and private debt
For new loans and bonds issued by corporates that are not rated by the previous methodology, anotherscoring methodology is put in place based on Ethifinance data provider.
This methodology relies on answers to 32 questions rated on a scale from 0 to 10 and classified in thesame 6 factors and 13 sub-factors as the corporate framework. The sectorial weighting and regional
adjustment are also the same.
The controversy level of the issuer is also evaluated by Ethifinance and integrated in the model in thesame way as the corporate framework.
As ESG assessment is relatively new in this asset class, disclosure for some issuers is very low, therefore
we add a penalty score for unanswered questions. This penalty also helps communicating to the loan
market, the importance of looking at all these topics while it is at the start of these ESG considerations.

▪

Other private debt assets classes

Proprietary methodologies capturing Alternative Debt specificities through quantitative and qualitative
assessment have been developed in 2021
1. Consumer lending
1. For ABS, mortgage loans and asset financing, a variety of indicators are taken into
account depending on the nature of assets:
1. CO2 emissions for auto ABS,
2. Energy efficiency measures or labels for residential or commercial assets,
3. Social risk linked to predatory lending, etc
2. Holistic ESG Due diligence is implemented based on:
1. ESG assessment on counterparty, asset portfolio & country
2. Data provided by external providers as well as questionnaire completed by ourcounterparty
2. Corporate lending
1. ESG Leveraged loans methodology is based on:
1. Questionnaire completed by corporate
2. Controversial risks review and sustainability analysis
2. CLOs framework focusing on CLO manager & portfolio to assess CLO Manager ESG
selectivity
3. Reg Cap approach based on originating banks & underlying portfolio to assess ESG on
Reg Cap transaction as a whole
3. The ESG scoring has been adapted to private debt & alternative credit specificities in assessing
country, counterparty and asset/project factor depending on the expertise as follows:

Source: AXA IM, 2021.

ESG Qualitative Research
Thematic Research
At AXA IM, we produce in-house ESG research on key themes including Climate Change, Biodiversity,
Gender diversity and human capital, Cyber security and data privacy, Corporate Governance notably.
Research papers are published on the Investment Institute page of our website, and listed further below
in this report. This research allows us to identify ESG risks, understand and anticipate their impacts on
the assets in which we invest as well as the impact of our investments on environmental and social
aspects. Key findings from this research also inform adjustments to our stewardship and exclusion
strategies. AXA IM’s thematic research papers are published on our Investment Institute.

Impact Investing in Listed Markets Framework
AXA IM uses a proprietary “Impact Investing in Listed Markets” framework to identify and select issuers.
Through this proprietary impact investing framework used by dedicated Impact Analysts, we canidentify best-in-class companies that contribute to the UN SDGs (categorized as ‘Impact Leaders’).
These pillars are what characterize impact investing and differentiate it from other approaches to
responsible investing:
AXA IM’s approach to impact investing in listed assets

Source: AXA IM, 2021. For illustration purpose only.

To read more about our AXA IM’s five pillars to impact investing
In 2022 we are expanding our coverage, especially with companies having positive impacts on
biodiversity and companies operating mainly in developing markets.
Impact Leader
Bank Rakyat Indonesia

Impact Leader
Carbios SA

Bank Rakyat Indonesia (BRI) is one of the largest
banks in Indonesia and offers a sustainablemodel for financialization. According to WorldBank data, only 49% of the Indonesian
population have a bank accoun5, making financial
inclusion a key priority. BRI targets growth inunderserved segments, serving 13.5 million micro

Plastic waste pollution continues to soar,
being one of the most pressing environmental
issues that we must tackle. Plastic waste
management and recycling infrastructure
however remain insufficient to effectively
solve the rising pollution problem. Only about
9% of all plastic waste generated since 1950

5 Demirguc-Kunt et al., 2018, Global Financial Inclusion Database, World Bank, https://data.worldbank.org/country/IDborrowers and the company aims for 55% of theloan book to be composed of micro loans by
20256. BRI offers a branchless banking channel
and trains customers to become BRI agents,
encouraging financial literacy. By increasing
access to financial services for underbanked
groups, the company contributes to SDGs 1 and
8. While the company is excelling as a key
provider of financial services to underbanked
populations, we remained concerned regarding
financing of potentially environmentally harmful
activities, including a small % of the loan bookthat financed palm farms. We have been
engaging with BRI, as part of our engagement
activities, since 2019 on financing of palm oil
producers. The company has made good
progress by encouraging borrowers to gain
RSPO 7 or ISPO certification 8 , and all new loans
require RSPO or ISPO certification. The company
has given existing borrowers a deadline toachieve certification and the portion of loans
financing palm oil producers has been
decreasing. We continue to engage the company
on this issue and monitor responsible financing.

has been recycled according to the OECD 9 .
Whereas mechanical recycling represented
the only way to treat plastic waste for
decades, new and impactful treatment
methods are emerging such as chemical andenzymatic recycling. Carbios is at the forefrontof enzymatic recycling, an enzyme-based
process that can depolymerize multiple types
of waste plastic simultaneously andrepolymerize them in virgin-quality material.
Carbios’ process can recycle previously hardto-treat plastics such as synthetic fibres, soiled
or coloured plastics. Previously unrecyclable
plastic waste is becoming an economically
viable raw material, with the potential todisplace demand for virgin, fossil-based
polymers. Peer-reviewed by the Nature
Journal, Carbios’ plastic treatment process
was calculated to be 10,000 times quicker 10than any biological plastic recycling process
tested to date and emits 30% less carbon
emissions than the conventional plastic
treatment systems involving incineration andlandfilling 11. Carbiolice, a subsidiary involvedin the bioplastic economy, is also developing
impactful solutions via enzyme-based
additives that accelerate the decompositionof bioplastics. We initiated a dialogue with thecompany during the year to elaborate on thegroup’s operational footprint. Using water in aclosed loop system and working at low
temperatures, Carbios’ system is resourceefficient and low in pollutant discharges. We
encouraged the company to pursue efforts inoperational footprint management, lifecycle
assessments, extra-financial reporting, andreassured them that sustainability disclosures
are a valuable tool for responsible investors.

Source: AXA IM, 2021. For illustration purpose only.

6 BRI Q1 2022 Financial Update Presentation, p17-18. https://www.ir-bri.com/misc/PS/2022/Q1-2022-Financial-Update-Presentation.pdf
7 RSPO - Roundtable on Sustainable Palm Oil
8 ISPO - Home (ispo-standard.com)
9 OECD - Plastic pollution is growing relentlessly as waste management and recycling fall short
10 Tournier, V., et al. "An engineered PET depolymerase to break down and recycle plastic bottles." Nature 580.7802 (2020):
216-219. Available at https://www.nature.com/articles/s41586-020-2149-4
11 Carbios (2021) Global Consumer Brands Unveil World’s First Enzymatically Recycled Bottles. Available at Global Consumer
Brands Unveil World’s First Enzymatically Recycled Bottles - Carbios

Green, Social, Sustainability, Sustainability-Linked and Transition bonds▪

Green, Social and Sustainability bonds

AXA IM has developed a proprietary green bond assessment framework12. We built on this to create
new frameworks for social and sustainability bonds. These are very similar in terms of structure, butsome aspects differ due to the specificities of social and sustainability bonds. This approach is stringent,but it is also continuously evolving and aims to fulfil three main objectives:•••

Driving investments towards authentic and impactful green assets and social projects
Raising the integrity and transparency standards of the Green, Social and Sustainability
bonds (“GSSB”) market
Ensuring that GSSB issuers are committed to fight climate change and to address
sustainability challenges, and that this commitment is reflected in business practices
and operations

Selectivity is key in ensuring that only the most relevant and impactful green and social projects receive
the necessary financing. These frameworks have so far been used to review more than 1600 GSSBs,
and we believe this has helped us to avoid possible misuse of funds, risks of unethical practices andgreenwashing. On average, since 2014, our green bond framework has led us to exclude around one infive bonds presented to us as green, social, or sustainable.
AXA IM’s GSSB assessment framework, notably inspired by the Green and Social Bond Principles (GSBP)
and the Climate Bonds Initiative (CBI), is made up of four pillars:
1.
2.
3.
4.

The environmental, social and governance (ESG) quality and strategy of the issuer
The use of proceeds and the process for project selection
The management of proceeds
Impact reporting

AXA IM’s Green, Social and Sustainability bonds proprietary framework

12 These frameworks are used in a systematic manner by our Global Green Bonds and Social Bonds strategies. They are used

to inform the decisions of portfolio managers for other strategies but do not apply in a systematic manner.

For each pillar, our analysts review, assess, and monitor several well-defined criteria, many of which
are mandatory. At the very least, the issuer has to surpass our exclusion criteria and to comply with our“requirement” criteria in order to be investable. If a GSSB also meets our “expectation” criteria, it would
place the issuer among the GSSB leaders. The factors outlined below are intended to be indicative andnon-exhaustive. This is primarily because individual GSSBs can vary greatly and therefore theirindividual assessment involves subjective criteria, as is always the case in qualitative analyses.
At AXA IM, we believe that the use of proceeds of a green bond should reflect the issuer’s efforts
towards improving its overall environmental strategy and its alignment with the Paris Agreement on
climate change. On the social side, the issuer should also make its ambition to deliver positive societal
outcomes clear. Full transparency about the projects financed and on the tracking of the proceeds istherefore essential to our assessment. We pay particular attention to impact reporting, where both
qualitative and quantitative indicators are expected.
To reach more about our Green Bond Framework.

Source: AXA IM, 2021. For illustrative purposes only.

▪

Sustainability-Linked Bonds

AXA IM is committed to the idea that investors will be better positioned if they acknowledge andaddress climate change and sustainability in their portfolios. This has prompted us to carefully monitor
the arrival of a new type of fixed income asset class: Sustainability-Linked Bonds (SLBs).
SLBs differ from Green, Social and Sustainability Bonds (GSSBs), a market where we have worked toachieve a leadership position for some years now. Unlike GSSBs, SLBs are not “use-of-proceeds”
instruments – just like conventional debt, they are general purpose bonds. However, they do represent
a new opportunity to fund the climate transition and other environmental and social challenges. They
may also have the potential to deliver long-term, sustainable performance for our clients.
The main difference between SLBs and conventional bonds is that SLBs integrate objectives linked toenvironmental, social and governance (ESG) factors. According to the SLB principles set out by theInternational Capital Market Association (ICMA) they are:“…any type of bond instrument for which the financial and/or structural characteristics canvary depending on whether the issuer achieves predefined Sustainability/ ESG objectives.
Those objectives are (i) measured through predefined Key Performance Indicators (KPIs)
and (ii) assessed against predefined Sustainability Performance Targets (SPTs).13”

Put simply, an SLB issuer will have to pay more to its investors if it fails to meet its predefined SPTs –and will still pay the same coupon if it succeeds. But this isn’t about greedy investors hoping SLB issuers

13 Source: Climate Bonds Initiativefail in their sustainability ambitions – it is about responsible investors like AXA IM using SLBs to
incentivise companies towards behaviour that we believe will benefit them, and us, over the long term.
SLBs could therefore act as a powerful tool, in particular, but not only, for high-emitting issuers tofinance their transition towards a more sustainable business model. While GSSBs focus on specificprojects and assets to be financed, SLBs establish a link between the issuer’s ESG ambitions and thefinancial characteristics of the bond. An issuer’s sustainability strategy may already form part of our
GSSB assessment process, but it becomes the core feature for an SLB. Despite the differences, we see
a common issue in these two types of instruments: There is no consensus on what a high-quality SLB
is. AXA IM has therefore decided to define its proprietary framework for evaluating SLBs, and we setout our methodology and criteria in the document available for download below.
We want to highlight that SLBs will not be part of our green and impact investments – as opposed to
GSSBs – but rather of our transition investments. We consider that SLBs and use-of-proceeds transition
bonds both relate to transition finance instruments that will allow AXA IM to take an active role inpowering that transition – in addition to our green and impact investing strategies through GSSBs.
AXA IM’s SLB assessment framework is made up of four pillars:
1.
2.
3.
4.

Issuer’s sustainability strategy & KPIs relevance and materiality
SPT ambition
Bond characteristics
SPT monitoring & reporting

For each pillar, at the very least, the issuer has to surpass our “exclusion” criteria and comply with our“requirement” criteria in order to be investable. If an SLB also meets our “expectation” criteria, it would
place the issuer among the SLB leaders, in our view. All of these criteria are set out for each pillar below.
The factors outlined are intended to be indicative and non-exhaustive. This is primarily due to the factthat individual SLBs can vary greatly and therefore their individual assessment involves companyspecific factors, as accepted within qualitative analysis approaches► Forecasts and our 2022 projects

If quantity matters and is critical to meet the Paris Agreement goals, the growth of the green bondmarket should not take place at the expense of its quality. AXA IM’s green bond assessment
framework is built to ensure that our expectations for green bond issuers are met. Our analysts aim
to select green bonds that are in line with our clients’ ambitious environmental strategies.
AXA IM’s call for transition bonds in 2019 reflected our view that the green bond market should keep
its standards in terms of quality and integrity, while providing solutions to support issuers in theirtransition journey. We welcome the recent development of sustainability-linked bonds, which areinnovative tools to finance the transition to a more sustainable economy. In 2021, we published ourframework for assessing Sustainability-linked bonds.

Focus on the EU Green Bond Standard
The EU Green Bond Standard (EU GBS) is meant to be a voluntary, non-legislative standard toenhance the effectiveness, transparency, comparability and credibility of the green bond market andto encourage the market participants to issue and invest in EU green bonds. Building on the ICMA
Green Bond Principles notably, the EU GBS is based on four key components:
1. Alignment of the green projects/assets with the EU Taxonomy
2. Mandatory publication of a green bond framework
3. Mandatory reporting, both on the allocation of proceeds and on environmental impact
4. Mandatory verification of i) the green bond framework and ii) the allocation report by an
external reviewer
AXA IM provided feedback on the consultation around the proposal for the EU GBS. We welcome
this initiative as it will bring mandatory, high quality requirements for green bond issuers that aims
at issuing EU GBS-certified green bonds. The EU GBS is similar to AXA IM’s proprietary green bondassessment framework on many aspects – e.g. high quality of green projects, mandatory reporting.
That said, we will keep using our internal assessment methodology, notably because we will keep
excluding fossil fuel and nuclear-related projects from our green bond investments – gas and nuclear
might be part of the EU Taxonomy. In addition, the EU GBS does not address the issuers’ ESG quality
and strategy, which is a key aspect of our assessment framework. Lastly, as a global investor, wecannot only rely on the EU GBS as it will predominantly target EU green bond issuers.
The European Parliament’s Committee on Economic and Monetary Affairs recently approved a draftof the proposed EU GBS. Regarding next steps, investors and issuers are waiting for a final validationof the standard before we start to see the first EU GBS-aligned green bonds on the market.

2.1.2 Exclusion policies
Our ESG Quantitative and Qualitative research help us to better understand the materiality of E, S andG challenges on sectors, companies, and countries. This research feeds our integration and exclusion
strategies by identifying ESG risks that could have a detrimental and irreversible effect on theperformance of our portfolios as well as on long-term global sustainability objectives if we were to be
exposed to assets that carry these risks. Our normative and sectorial exclusions set the red lines andsend a clear message to companies and sovereigns on what we consider it is not acceptable tocontribute to a climate and social transition.
On assets on which we remain exposed, we apply our voting and engagement strategies with theobjective to support issuers in their transition journey. In applying our stewardship strategy, we set
clear and meaningful objectives communicated to management, we hold regular meetings to verify andevaluate progress; and we vote with conviction or pursue other escalation techniques when required.
Our Responsible Investment policies are regularly updated to reflect its convictions and comply withthe latest recent regulatory developments, including the Shareholders’ Rights Directive II, theSustainable Finance Disclosure Regulation as well as the EU Taxonomy regulation.
By ruling out certain activities or practices, our exclusion policies help us to address sustainability risks.
Most of our investments benefit from AXA IM’s sectorial polices while an additional screening is in placefor ESG Integrated and ACT assets through our ESG standards (our RI fund categories are described in
the section 2.5). When implemented simultaneously these policies cover:•Environmental – E: climate (coal mining and coal-based energy production; oil sands production
and oil sands-related pipelines; shale and tight oil and gas; arctic oil and gas), biodiversity••(ecosystem protection and deforestation) and soft commodities (food commodities derivatives) –those exclusions are part of what is called AXA IM sectorial policies.
Social – S:o Controversial weapons manufacturing - part of AXA IM sectorial policies
o health (tobacco producers), labor, society and human rights (violations of international
norms and standards; white phosphorus weapons producers; exclusion of investments insecurities issued by countries where serious violations of Human rights are observed) –those exclusions are part of what is called AXA IM ESG standards
Governance – G: business ethics (severe controversies, violations of international norms andstandards), corruption (severe controversies, violations of international norms and standards) –part of AXA IM ESG standards.

2021 Updates
In 2021, AXA IM strengthened its exclusion policies with:••

The reinforcement of existing sectorial and normative exclusions to eliminate companies andsovereigns exposing portfolios to ESG risks and to exclude companies that have the worst
practices in terms of managing their environmental impact, governance and social practices.
▪ We extended our existing palm oil policy in June 2021 with a more comprehensive
approach to ecosystem protection and deforestation. In addition to the exclusionof companies involved in unsustainable palm oil production, including land rights
conflicts and illegal logging issues, we now ban companies which face significant
land use controversies and are responsible for biodiversity loss in relation to soy,cattle and timber. We also reinforced our engagement approach with companies
involved in those issues, to help change and improve practices.
▪ In September 2021, our ESG Standards policy was revised, reflecting a reinforced
consideration of human rights when assessing corporates and sovereigns. This
revision aimed to further align investment processes with several global initiatives
and norms. These include the United Nations Guiding Principles on Business andHuman Rights, the International Labour Organization (ILO) conventions, the United
Nations Global Compact (UNGC), and the OECD Guidelines for Multinational
Enterprises, with the exclusion of issuers which do not comply with those norms.
▪ As for sovereign investments, AXA IM avoids investing in debt instruments issuedby countries where worst forms of human rights violations are observed.
In November 2021, AXA IM announced new exclusions and engagement programme, which arebeing rolled-out early 2022.

2.1.3 Stewardship policies
Our aim is to play a leading role in financing the transition to a greener and more sustainable world.
Part of this involves encouraging companies in their transition journey through focused shareholder
engagement and open dialogue to enable change. Through our Voting and Engagement, we have an
opportunity to use our influence to drive a broader change for the benefit of society and the planet.

This is a central pillar of responsible investment at AXA IM, and we therefore continuously review ways
to make this dialogue as efficient and impactful as possible.
We see three essential ways to do this: Clear and meaningful objectives communicated to
management; regular meetings to verify and evaluate progress; and voting with conviction or pursuingother escalation techniques when required. Our active dialogue with companies allows us to effectively
monitor our investments, and ensure we maintain open channels which can enable change to thebenefit of society, the planet – and ultimately our clients.
Here are reference materials describing our Voting and Engagement strategies and the result of theirimplementation:
►
►
►
►

▪

Corporate Governance and Voting policy
Engagement policy
2021 Active Ownership and Stewardship report
Full voting records

A clear voting strategy on Climate change issues

The use of our voting rights enables us to convey clear and strong messages to management, informedby our research and the progress of engagement with a company. We believe targeted voting can help
us fulfil our promise to clients to act as an effective steward of their assets, leveraging our considerable
size of aggregated assets under management to reinforce a shared message.
We believe investors are most effective in this when the momentum is collective and consistent. Right
now, with the potential powerful influence of the finance industry in driving the transition becoming
ever clearer, we think that dispersing voting decisions widely through potentially hundreds of investors
could risk diluting the considerable influence of the asset management industry, as well as detaching
voting from the engagement process.
We consider voting to be a crucial aspect of being an active shareholder. It is a vital part of theinvestment process and an opportunity to influence companies. Our voting and engagement activities
are closely aligned. We regularly engage companies before and after the vote. AXA IM has establisheda Corporate Governance Committee which is responsible for overseeing the implementation of AXA
IM’s Corporate Governance & Voting Policy. The policy is reviewed and updated annually by theCommittee prior to voting season to apply to all meetings going forward.
We also have voting guidelines for specific markets ensuring we do not apply a one-size-fits-all approach
but are more refined in our thinking. Ultimately, when reviewing resolutions proposed at general
meetings, we judge them against fundamental principles of good corporate governance, while taking
account of best-practice standards appropriate to the relevant market and the company’s
circumstances.
Therefore, this policy prescribes general principles, but AXA IM will take into consideration specificcircumstances such as geography, company size, market capitalization, number of our holdings, andmost importantly the ongoing engagement with the management and directors of the company
concerned. Our approach is based above all on a regular dialogue with the companies we invest in, an
understanding of their activities, their sector and the challenges they face.
General Principles:
1. No abstention: AXA IM aims to vote against or for a resolution and abstain in rare cases, guided
by exceptional circumstances.

2. Support for management: As a transition leader, we aim to support the companies in which weinvest and therefore their boards, by voting in favour of proposals unless they are inconsistent
with the appropriate direction of travel.
3. Engagement: In the event of a resolution that is contrary to our policy, standards of good
governance or the protection of the long-term interests of shareholders, we will seek to engage
with the company before voting against a resolution, on a best effort basis and depending on
several factors, including the severity of the ESG risk tackled via the resolution and thesignificance of our holdings. We strive to vote in an informed manner, to have a quality vote,guided by our policy and any additional information provided by the company, or thereby tochange the approach taken by the company. We will seek to inform the companies engaged ofany potential vote against management in advance, and the reasons for that vote. For the othercompanies, we will inform them of our voting intention on a best-efforts basis.

2021, we voted at 5,546 general meetings andWe did not fully support management for 59% of relevant general meetings
In

The 2021 voting season was dominated by a desire to integrate environmental and social issues intovoting choices, driven by social justice movements, or highlighting environmental inaction. It
contrasted with the more “timid” trend of 2020 on climate and diversity issues. The surge of ‘say-onclimate’ proposals has demonstrated the market focus on environment and climate transition. The
social pillar was also a hot topic notably human rights and capital management in light of the ongoing
impacts of the pandemic.
The policy response to the climate emergency has reinforced the need for companies to act on theenvironment and accelerate the implementation of their strategy. Historically, the climate issue has
been addressed through shareholder resolutions, or even activism, and not through management
resolutions. The 2021 season was therefore notable for the rise of say-on-climate resolutions, which
see the company set emission reduction targets and commit to submit its climate action plan to anannual vote. We voted on 23 say-on-climate proposals, with 18 proposals submitted by management
and five shareholder-led proposals.
When it comes to climate specifically:••

Concerns over the climate strategy of a company may impact our votes oon “traditional”
resolutions such as the appointment of board directors, the approval of the remuneration
policy for instance, especially for sectors which are considered most material to climatetransition.
we have a clear approach that frames how we decide whether to support climate-related
resolutions presented by management or shareholders:▪
▪
▪

Case-by-case basis assessment of say-on-climate by the governance team and our
climate change experts
Particular attention to the scientific evidence on which these transition plans are
based
Analysis of the governance framework around these resolutions (board oversight,
executive remuneration, frequency, etc.)►

Vision for 2022

As in 2021, the next few years will be dominated by a new climate activism, with a discussion
around companies’ short- and medium-term climate strategies – and around social issues throughthe Just Transition theme.
Learning from the 2021 voting season, we are updating our voting policy in 2022 to further
integrate ESG issues into corporate governance:• We will review the ESG skills of directors• Integration of ESG elements in remuneration, adding tangible, relevant, meaningful key
performance indicators• Transparency as priority by pushing for the adoption of non-financial disclosure for oil majors• Support where it is deserved by backing management that presents well-proposed transition
plans that embeds regular review and sets medium-term targets
For more details on our voting activities in 2021 and our voting process, please refer to our 2021 Active
Ownership and Stewardship report.

▪

Shareholders’ Engagement

Through our engagement activities, we seek to use our influence as investors to encourage companies
to mitigate environmental and social risks relevant to their sectors. We do this on behalf of our equity
and bond holdings, in listed and non-listed markets. For ‘engagement with objectives’, wesystematically track engagement progress using five stages that set out the range of possible outcomes.
We take an active engagement approach, emphasising direct dialogue with companies on sustainability
and governance issues that have a material impact on long-term financial performance. We also
conduct engagement to contribute to the achievement of societal targets such as those defined by theUnited Nations’ SDGs. We determine our engagement priorities based on our observation of global
market developments and emerging ESG practices. Our engagements are linked to our key thematic
focus areas and we principally engage in a proactive fashion.
Alleviating Climate Change is one of our key focus when leading these activities, representing 33% of
our engagement activities in 2021.
While this theme is transversal and relevant to all firms from all sectors, we focus our efforts wheremateriality is greatest, notably energy (hence the relevance of UN SDG 7 and SDG 13), but also banks –through their lending policies as well as the building materials industry.
We also noted a clear increase on the proportion of corporate governance-related engagements (21%)
versus 2020 levels (16%), reflecting the trend towards the integration of ESG at companies’ strategy
level and across business activity, a number of these meetings also addressing E and S issues. Human
capital (20%) and resource and ecosystems (14%) were also major focuses of engagement, explainedby the implementation of the gender diversity engagement program on SBF 120 companies at the
beginning of 2021 and the development of strengthened engagement program on biodiversity in thesecond half of 2021. In total, we conducted 283 engagements with 245 entities. More than 80% of
engagements in 2021 were linked to the UN SDGs.

2021, we conducted 283 engagements with 245 entities.
More than 80% of engagements were linked to the UN SDGs.

InIn 2021, we focused our climate research effort on the energy transition and the oil and gas industry.
The findings from this research will be of direct use while engaging with companies in the oil and gas
value chain.
Regarding engagement, the year was notable for the first ‘say-on-climate’ resolutions at several annual
general meetings (AGMs) where firms outlined their climate action plans. In this context, we engaged
and held detailed discussions with French groups TotalEnergies and Vinci. We also signed a letter withother investors, coordinated by Climate Action 100+, to be read at TotalEnergies’ AGM highlighting
potential areas of improvement in the group’s climate strategy. We also participated in collective
engagements with French utility Engie 14 , car maker Renault 15 and Colombia’s Ecopetrol 16 , threecompanies which went on to significantly improve their climate commitments. Through our votes, we
contributed to the election of three new board members at US oil group ExxonMobil, against the explicit
wishes of the management.
Increasingly, the discussions we are having while engaging on climate are becoming more detailed andspecific. Beyond the minimum requirements of having both a long-term ambition and mid-term targets
aligned with Paris Agreement goals, we are asking companies to be very detailed about their actions,the alignment of governance and capital allocation with the strategy and the inclusion of their wholevalue chain in their climate strategy. We also encourage transparency around the implementation ofthese commitments through public reports. At AXA IM, we believe that this holistic approach isnecessary to assess the credibility of those strategies and is consistent with the systemic nature of theenergy transition. When sector frameworks exist, we encourage investee companies to set sciencebased targets, and we therefore supported the annual CDP-related investor statement17.
► Vision for 2022

We will continue to push for more ambitious climate strategies and expect more ‘say-on-climate’
resolutions to be put to investors. We will be attentive to their content in light of our revised
engagement requirements as described above. We will select our climate engagements based on themateriality for AXA IM and because our net zero commitments. We will also continue ourparticipation in the Climate Action 100+ investor group.

Three strikes and you’re out engagement approach
Climate focus
From 2022, Companies we consider to be laggards in addressing climate change and its risks will be
subject to a ‘three strikes and you’re out’ principle. This policy aims to define clear areas of
improvement for those companies, tailored to their activities, and communicated to their
management at the beginning of the engagement with a clear and short timeframe for progress.
For more details on our engagement activities on ESG themes and engagement process, please refer
to our 2021 Active Ownership and Stewardship report.

14 Putting strategy into action (engie.com)
15 Renault Group - Climate Report April 2021 (publispeak.com)
16 Ecopetrol Group announces its commitment and plan to achieve net zero carbon emissions by 2050
17 220 financial institutions across 26 countries are pressing 1600 companies to set emissions reduction targets through the

Science Based Targets initiative to ensure that corporate ambition is independently verified against the de-facto industry
standard for robust and credible climate targets. From July 2022, these must be aligned with a 1.5°C pathway to beapproved. Financiers with $29 trillion ask 1600 companies for science-based targets ahead of COP26 - CDP. CDP (formerly
the Carbon Disclosure Project) is a donor- member- and government-funded organisation that runs a global disclosuresystem for investors, companies, cities, states and regions to manage their environmental impacts.

▪

Involvement with industry groups and policy makers

At AXA IM we adhere to the principles, standards and codes which govern policies and practices in themarkets where we are active. For many years, responsible investment practices were framed by ‘soft’,
industry-led standards, but 2021 marked a step change for the financial industry in Europe. The
Sustainable Finance Disclosure Regulation (SFDR)18 came into force, along with its French counterpart,the AMF Doctrine 2020-0319 and the International Sustainability Standard Board (ISSB) was created.
Still, as we enter the implementation phases for those groundbreaking sets of legislation, engagementwith policymakers and regulatory authorities remains essential to address short-term challenges. The
objective of our public policy engagement is to encourage a regulatory framework for investors where
sustainability and responsible investment are taken seriously. We think this can help tackle
greenwashing – where climate-related rhetoric is not matched by action. Our approach reflects andreinforces the practices, framework and disclosures we have developed over time including in responseto the Article 173 of the Energy Transition Law20. Our advocacy efforts have focused on the following:•••

Advocating for relevant, comparable, and sustainability-related information to become
available for a broader scope of issuers.
Addressing some of the current shortcomings of the SFDR. While we strongly support its
overarching objective of providing increased transparency, and comparability to our clients,
the regulation at this stage remains vague on a number of concepts which are essential to its
effective application. This includes the definition of what a sustainable investment is, resulting
in uneven implementation across the market. The regulation had been intended as adisclosure regime but has been seen by many as a quasi-labelling regime – potentiallydamaging the legitimacy of the SFDR, in our view.
Bringing closer together net zero efforts and sustainable finance policy implementation. These
two major priorities mobilised teams across the industry in 2021, requiring a rethink of ourway of working in order to further integrate environmental (and social) considerations across
our organisations. Both priorities aim to efficiently channel financial flows to ensure thefunding of the transition to a world aligned with the goal of keeping global heating to well
below 2°C or ideally 1.5°C. In 2021, in our engagement with policymakers as well as with net
zero coalitions, we have advocated for further convergence between the two. This could beachieved in many ways, including with a ‘Transition Label’, with clear requirements both interms of investment process, forward-looking targets in terms of carbon-intensity reduction
and robust stewardship policies. We welcome recent initiatives in the UK and France todevelop such a label and will continue to promote this topic through our engagement in 2022.

► Vision for 2022

We think 2022 will be yet another landmark year on the public policy side, where we will continue
to make progress in the implementation of sustainable finance policies, and hope to see equal
momentum on the real policy side, while acknowledging the impact and influence of macroeconomic events. We aim to continue to engage with our investor base, providing educational
content on those important and evolving policies, to encourage an understanding of how they may
change our way of working and change the nature of portfolio investments.

18 EUR-Lex - 32019R2088 - EN - EUR-Lex (europa.eu)
19 Position - Recommandation DOC-2020-03 : Informations à fournir par les placements collectifs intégrant des approches

extra-financières (amf-france.org)
20 Article 173 - LOI n° 2015-992 du 17 août 2015 relative à la transition énergétique pour la croissance verte (1) - Légifrance(legifrance.gouv.fr)

AXA IM Alts approach to responsible investment
As one of the world’s largest real assets managers, our investment decisions do much more than
generate financial returns. They can also minimise the environmental impact of our assets, protecting
them against the effects of climate change and working collaboratively to unleash the transformative
potential of a more sustainable future.
Within AXA IM Alts, we take an integrated approach to responsible investment management whereby
we follow three steps when systematically integrating ESG considerations into our investment
decisions: defining the investible universe by applying sector exclusions and ban lists, integrating ESG
factors into investment decisions with proprietary ESG scores, and integrating ESG targets into active
management for annual business plans where relevant.
Responsible investment sits at the core of AXA IM Alts’ approach to business, where we consider bothfinancial and non-financial criteria in our investment decisions. This helps us to build a more sustainable
future while also delivering tangible, real-world assets that contribute to the global economy and theneeds of society. Here is how we are integrating ESG considerations into our investment cycle in a way
which is relevant for our various investment platforms:

Source: AXA IM, 2021. For illustrative purpose.

▪

AXA IM Alts: Private Debt and Alternative Credit

Within the private debt and alternative credit businesses, our focus rests where we are able to take themost relevant actions to consider ESG in our investment decisions. This approach acknowledges someof the limitations of securitised ownership to take direct action on underlying investments and better
informs how we define our investment universe to limit exposure, in alignment with AXA IM policies,
and how we more specifically include ESG factors in our investment decisions across the breadth of our
product base.
Consumer lending
For ABS, mortgage loans and asset financing, a variety of indicators are taken into account dependingon the nature of assets:• CO2 emissions for auto ABS,••Energy efficiency measures or labels for residential or commercial assets,
Social risk linked to predatory lending, etc
Holistic ESG Due diligence based on:• ESG assessment on counterparty, asset portfolio & country• Data provided by external providers as well as questionnaire completed by our counterparty
Corporate lending
ESG Leveraged loans deep dive based on:▪ Questionnaire completed by corporate▪ Controversial risks review and sustainability analysis• CLOs framework focusing on CLO manager & portfolio to assess CLO Manager ESG selectivity• Reg Cap approach based on originating banks & underlying portfolio to assess ESG on Reg Cap
transaction as a whole•

Real Estate lending• Balanced ESG assessment factoring:▪ Environmental impact▪ Sponsor commitments▪ Country score• For CRE, assessment of the underlying portfolio, focusing on:▪ Energy efficiency labels, EPC,
▪ Clean transportation,▪ Environmental risks• Infrastructure debt project assessment including its alignment with 7 of UN Sustainable
Development Goals▪

AXA IM Alts: Direct Equity

Listed Real Estate Investment
For Listed Real Estate Investment, a shared approach with AXA IM Core is used and assessed inconjunction with the AXA IM Core RI analysts:• ESG assessment on investee company, asset portfolio & country, including:▪ CO2 emissions▪ Engagement and Controversy levels▪ Human Rights and Employment considerations▪ Data provided by external providers as well as questionnaire completed by ourcounterparty• Structured engagement to identify real estate specific underlying risks
Infrastructure Investment (Direct Equity)
ESG Investment framework based on:▪ Proprietary methodology developed in conjunction with the RI team and Questionnairecompleted by investment team
▪ Controversial risks review and sustainability risk analysis• Full DD assessment based on framework to assess underlying operating business and counterparty,
including specific ESG and decarbonisation plans.
•

Real Estate Investment• 5 key ESG factors assessed at IC:▪ Regulatory / Transitional Risk
▪ Physical climate risk
▪ Certification level•▪ KYC/AML checks▪ Proprietary ESG score
ESG Score: Assessment of the underlying asset(s), focusing on:▪ Energy, water, waste, tenant engagement, green leases, procurement controls, climate risk
and resilience and proposed action plan▪

Integration of ESG into Real Estate
Real Estate is responsible for almost 40% of global carbon emissions, annually. As one of the world’s
largest real asset managers, we can take actions which have a meaningful impact on reducing ourcarbon emissions to contribute to achieving the Paris Agreement targets and limit global temperature
increase to below 1.5°C.
Our goal is to enhance the value of assets we manage on behalf of our clients in a responsible andsustainable way. To do so, we have actively integrated ESG criteria into our investment decision-making
processes.
In our direct real estate investment business, we include consideration of both financial and nonfinancial criteria in our investment decisions. Non-financial criteria include environmental, social andgovernance (ESG) factors as well as sustainability risks, which may have a material impact on investment
performance.
We assess sustainability risks and opportunities through the systematic review of key non-financial
factors in each investment committee proposal. These factors provide us with a sufficiently broad
approach to flag most sustainability-related risks while enabling our investment teams to focus on
specific and relevant investment-level risks, where apparent.
During the Investment Committee (IC) process (the decision-making forum for all real estate
investments), proposals consistently review five ESG factors to provide an initial view on asset-levelsustainability risk and form the basis of key actions for the ongoing strategic asset plan for each
investment. These factors cover the following:•

Regulatory Risk reviewing the estimated level of transitional or regulatory risk associated withthe asset, (eg. By using EPC levels as a proxy for risk, where available)•

Physical Risk, reviewing the estimated level of physical risk associated with natural
catastrophe and climate change,•

Independent certification, reviewing the appropriate level and type of certification for a
relevant market, and providing a view on the relative level of asset quality,•

Counterparty Risk, which reviews appropriate counterparty governance risk, including checks
against our Anti-money laundering and KYC reviews in addition to AXA IM exclusion policies,and,•

ESG rating score, (as described above) reviewing the estimated performance of the asset
relative to the AXA IM Real Assets portfolio at a sector and country level, assessed using AXA
IM’s proprietary ESG rating tool and addressing both sustainability risk and principal adverse
impacts and setting up the basis for active management of the asset.

▪ AXA IM Alts: Building tomorrow
Our approach to sustainability allows us to identify and manage risks while capturing opportunities to
add value. ESG factors are incorporated at every point of the investment cycle, from origination andinvestment to active ownership. Our strategy is defined by three pillars:•‘’Decarbonisation’’The built environment contributes significantly to the world’s annual carbon emissions, giving us theopportunity to make an important contribution to decarbonisation. We are actively investing towards
a low carbon future, be it through the creation of infrastructure for renewable energy, developing bestin-class real estate, or regenerating and transforming existing building stock worthy of a place in the
low carbon future.
At AXA IM Alts we see growing interest in solutions which invest in innovation. From natural capital andnature-based solutions, to clean energy generation and usage, to reducing reliance on carbon intensive
sources of energy that are damaging to the environment.
• ‘‘Resilience’’
The impacts of climate change represent a number of new risks to our investments. For AXA IM Alts,
the most material are physical risks, (such as from increasing extreme weather events,) and transitionalrisks, (such as from changes to regulations as major economies work toward a low carbon future). Thesechanges also bring new opportunities to add value. We are rapidly building our ability to identify andact on these risks and opportunities, improving the resilience of our investments and strengthening
their ability to withstand some of the impacts of climate change.
• ‘’Building Tomorrow’’
By investing in the ingenuity and innovation of our people, we are helping them to identify and capture
new opportunities to create value while minimising risk. We choose carefully where to focus ourcreativity and capital to achieve the most impact, and we engage with a broad set of stakeholders in
our efforts to embed sustainability throughout our investments. Together, we are investing in andcreating a future that our people and future generations can thrive in.

In 2020, AXA IM Real Assets completed the acquisition of one of London’s largest private rented
residential complex’. Originally constructed in 1937, the asset is comprised of 1,233 units (795,990 sqft) on a 7.5-acre site. The asset features a 3.6 acre internal publicly accessible garden, overlooks theRiver Thames and benefits from excellent transport links to London’s major activity hubs. In addition,
the asset has a comprehensive level of amenity including tennis courts, a gym and fitness center andintegrated retail. Given the asset’s history, age and location, it provides an exciting opportunity toundertake a comprehensive refurbishment, breathing new life into the asset for the long term.

A comprehensive energy strategy has
been developed in order to align theasset with future expectations ofenergyperformanceandsustainability
considerations,toaddress the evolution of the market
and legal framework in terms ofenergy performance and thermal
comfort, targeting standards similar to
new developments.
Works target an >75% improvement
in energy use intensity (EUI), themetric used to express a building’s
energy use as a function of its size, by driving energy performance of the building through betterbuilding insulation, transformation of the heat distribution network, integration of more efficientequipment and the introduction or on site solar renewable energy supply. The effect of these initiatives
will be to reduce the asset’s carbon footprint to close to zero, remove dependency on fossil fuels, andprovide more substantial operational energy savings.

2.2 Climate Strategy

The challenge of reaching 1.5°C for Assets Managers
Olivier Eugène, AXA IM Head of Climate Research“Global GHG21 emissions are projected to peak between 2020 and at the latest before 2025 in global
modelled pathways that limit warming to 1.5°C (>50%) with no or limited overshoot and in those that
limit warming to 2°C (>67%) and assume immediate action. In both types of modelled pathways,
rapid and deep GHG emissions reductions follow throughout 2030, 2040 and 2050 (high confidence).
Without a strengthening of policies beyond those that are implemented by the end of 2020, GHG
emissions are projected to rise beyond 2025, leading to a median global warming of 3.2°C by 2100”
22.
Our apologies as we start with a long and maybe obscure quote from the latest International Panelon Climate Change (IPCC) report, but it sets the scene. In particular, it highlights the rising gap
between what the scientific consensus says and what human societies do when it comes to climatechange and its impacts.
What the IPCC is really pointing at is that GHG emissions are not expected to decline at a paceconsistent with a 1.5°C scenario, and possibly even not 2°C. Indeed, GHG emissions have continued
to increase over the past decade and CO2 emissions were most likely at an historical record high in
202123
At AXA IM, we are engaged to be a net zero asset manager and to align our investments with thegoal of the Paris agreement. However, achieving any temperature outcome is a binary situation: it
succeeds, or it does not, and it can only be a collective endeavour. Any climate stakeholder – be it acorporation, an investor, a citizen, or a country - cannot on its own be aligned to, for instance, a 1.5°C
pathway, but it can contribute to it.
As such, the IPCC warning that the world is not on track with a pathway where the increase intemperature is limited to 1.5°C – and that the window to achieve this goal is closing fast – is also awarning to investors. Building investment strategies around 1.5°C may unfortunately become
increasingly challenging. While it is essential to maintain a strong level of ambition, a reckoning could
be unavoidable if and when the cold reality clashes with stated objectives.

Following its decision to join the Net Zero Asset Managers initiative24 in December 2020, AXA IM worked
over the year on the reinforcement of its Climate Strategy to set its Net Zero targets and drive
meaningful environment and social change.
•

Net Zero targets:▪ AXA IM published its first Net Zero target in October 2021, as part of the first NZAM
progress report, committing to apply Net Zero approaches on 15% of its AUMs25. Thistarget was subsequently revised in April 202226, to cover 65% of the AUMs.

21 Greenhouse gas
22 IPCC_AR6_WGIII_SummaryForPolicymakers.pdf
23 Global Energy Review: CO2 Emissions in 2021
24 AXA IM to join the Net Zero Asset Managers initiative and to commit to net zero emissions goal | AXA IM Corporate (axa-

im.com)25 NZAM-Progress-Report.pdf (netzeroassetmanagers.org)
26 NZAM-Initial-Target-Disclosure-Report-May-2022-1.pdf (netzeroassetmanagers.org)

▪

•Policies:
▪

▪

▪

•

Development of a Net Zero Framework on Corporates and Sovereigns which follows
industry standards27 considering internal and external information to determine the
Net Zero Profile of Companies.

Since 2017 our Climate Risks policy 28 is made up of Coal and Tar Sands-related
exclusions, reinforced since then. In 2021, AXA IM decided to expand its exclusion
criteria to Unconventional Oil & Gas by integrating Shale, Fracking and Arctic extractionin addition to existing oil sands production – for which we reinforced the exclusion
criteria;
Reinforcement of our Engagement policy29 with a specific “Three Strikes and You’reOut” engagement policy focused on companies which are laggards from a climate
perspective and exposed to a risk of divestment if they don’t not progress on specificengagement objectives, applicable from 2022;
Active approach to voting, paying particular attention on addressing our Climate
Strategy objectives through careful review of climate focused shareholder ormanagement resolutions.

Net Zero Targets

Following our decision to join the NZAM in December 2020, AXA IM published its first Net Zero target
in October 2021, committing to manage 15% of its AUMs in line with Net Zero by 2050. Following thisfirst submission, we further intensified our efforts across the whole business to develop an approach
which is robust and can be implemented in an effective manner by investment teams, leading to arevised submission in April 2022, with a more ambitious target covering 65% of total assets managed
in line with net zero by 2050.
Announcements and decisions made by policymakers in different locations to encourage the financial
sector to continue to play a leading role in the transition, for instance Article 29 of the Law EnergyClimate in France, gave us more comfort on some of our points of attention in relation to assets outsideof what we first deemed as eligible. We also moved from a bottom-up approach at fund level to a topdown approach at asset class level, specifically in relation to third party assets. Going forward, our aim
is to continue to grow the proportion of net zero-aligned AUM as reliable methodologies become
available for all asset classes.

27 The Task Force on Climate-related Financial Disclosures, the IIGCC, the CREEM and the GermanWatch Climate Change

Performance Index2828 Our Policies | AXA IM Corporate (axa-im.com)
29 AXA IM intensifies pressure on companies to take meaningful action on sustainability issues with enhanced stewardshipfocus | AXA IM Corporate (axa-im.com)

The detail of our April 2022 submission30 is as follows:

April 2022 revised target••$650Bn AUM to be managed in line with Net Zero (65% of total scope, 75% of total scopeexcl. JVs)
Asset classes out of commitmento Infrastructure: data collection on-going, targets to be set end of 2022 / early 2023
o Private Equity: pending methodology
o Other: no methodologies defined as of today

We face a number of challenges in the development of our Net Zero strategy. It includes the access toreliable and tangible raw data and metrics. Although initiatives to encourage issuers to report in a morehomogeneous, transparent and usable manner are multiplying, ESG Data remains heterogeneous andtherefore complicated to use when investing and reporting. We are dependent on the ways companies
report on environmental data, methodologies developed by external data providers and the frequencyof data refresh. Therefore, as interest in ESG grows among clients and regulators in many geographies,
the need for common, clear and usable standards is a top priority for the financial industry. This forms
an important area for our public policy engagement, and we actively participate in industry bodies andinteract with regulators. The convergence of standards between sustainable finance and companies’
extra-financial reporting is in line with the “double materiality” concept.
In addition, industry frameworks must be adjusted to the characteristics of our portfolios, including
geographies, asset classes and sectors. At the definition stage, we also consider the operational
implementation of the strategy to make sure our commitments are monitored in a robust and efficientmanner.
Targets

Baseline

Comments

116.3298
tCO2e/$m
revenue (end 2019 data)•

Scope 1 and 2 only as data quality
and coverage for Scope 3 is toolow.

•

We have set an objective toincrease capture of Scope 3 data in
coming years•

This means we aim to have only
issuers categorised as dark blue,
blue and light blue according to
AXA IM Coloring frameworkdescribed below32

Corporates (Fixed Income and Listed Equity)
Carbon Intensity
Reduction

Share of AUM
net zero, aligned
or aligning by
2040-25% carbon intensity
reduction31 by 2025 and -50%
by 2030

100% AUM in material sectors
net zero, aligned or aligningby 2040

36% of corporate AUM inmaterial
sectorsisconsidered net zero,aligned or aligning (end2021 data)

30 As reported in the NZAM second progress report: NZAM-Initial-Target-Disclosure-Report-May-2022-1.pdf(netzeroassetmanagers.org)
31 Weighted average of carbon intensity on revenue for all corporates, regardless of their asset class or fund/SMA
32 AXA IM Climate Coloring framework is based on the Net Zero Investment Framework developed by the Paris Aligned
Investment Initiative

Share of AUM
dedicated toclimate solutions

6% by 2025

2,1% of AUM dedicatedto climate solutions (end2019 data)•

Based on AXA IM’s Green
Investments
definitionasdescribed in this report.

•

Definition may evolve as EU
Taxonomy is implemented, and Net
Zero Investment Framework clarify
their definition. This would lead us
to revise our target.

Share offinancedemissions net
zero or aligned

50% by 2025

46%
offinancedemissions in material
sectors are already net
zero or aligned (end 2021
data)

•

This corresponds to issuers
categorised as Dark Blue or Blue in
AXA IM coloring frameworkdescribed below.

Share offinancedemissions underengagement

70% by 2025

52%
offinancedemissions in material
sectors are subject todirectorcollective
Engagement
andstewardship
actions(collaborative for 42%
and/or individual for38%) (end 2021 data)•

Engagement activities conducted
directly by AXA IM are accounted,
along with emissions subject tocollaborative engagement even if
AXA IM does not systematicallyparticipate, in line with Paris
Aligned Investment Initiative Net
Zero Investment Framework.

90% by 2030

Sovereigns
Beat the CCPI benchmark33

Already compliant with
NZIF
recommended
target setting guidance
based on CCPI score (end2021 data)

Carbon Intensity
Reduction

Reduction of WACI (tCO2e /USD mn EV) of 20% by 2025
and

8.5 tCO2e / USD mn EV(end 2019 data)

CRREM pathway

50% of real estate AUMs
under CRREM pathway 34 by
2025

Baseline for percentage
of assets under CRREM
pathway currently underdevelopment,
anticipated Q3 2022

Real Estate

We intend to report on an annual basis on progress vs these targets in our TCFD / Article 29 report.
AXA Investment Managers also continues to work closely with its parent company in the Net Zero Asset
Owner Alliance with the aim of defining how investment strategies will support the shift of the economy
to a 1.5°c pathway.

33 Climate Change Performance Index
34 Decarbonisation Pathways - CRREM Global•Exclusions

As part of our ESG integration process, we exclude firms which fail to meet certain climate change
criteria. Most of our investment portfolios exclude electric power generating utilities and mining
companies that are not credibly demonstrating a commitment to energy transition, as part of ourclimate risks exclusion policy (see 3.1).
In 2021, AXA IM strengthened its climate risks policy35, adding exclusions in the unconventional oil &gas sector. These new criteria have been implemented in February 2022:•••

A new ban on companies deriving more than 10% of their oil & gas production from the Arctic,
as defined by the Arctic Monitoring and Assessment Programme (AMAP), or representing morethan 5% of the global production from the region;
A new ban on companies deriving more than 30% of their oil & gas production from fracking
and producing less than 100 000 barrels of oil equivalent per day;
The oil sands exclusion was reinforced by adding an exclusion for companies producing morethan 5% of the global oil sands production.

Our exclusion policy which applies to 89 % of AXA IM AUMs36 enables us to grant exemptions to issuers
which are close to the exclusion thresholds, and where a robust transition plan is being implemented
successfully. This exemption process is overseen by a RI governance committee, with each exemption
request reviewed on a case-by-case basis37.
To build our coal exclusion list, we use the Global Coal Exit List (GCEL) produced by German NGO
Urgewald. The GCEL includes companies that generate more than 20% of their revenues from coal, or
utilities where the share of coal power generation is 20% or more, or companies producing more than
10 million tons of coal, or companies with more than 5GW of installed coal-fired power capacity
generation. Urgewald also includes companies with coal expansion projects in mining, power
generation and infrastructure. AXA IM has established its own thresholds, as described in our Climate
Policy, and overlays them on the GCEL.
To build our oil & gas exclusion list, applicable from February 2022, we use the Global Oil & Gas Exit List
(GOGEL), also produced by Urgewald. The GOGEL provides information on companies operating in the
oil & gas industry. It notably provides the names of companies involved in the upstream part of thevalue chain, i.e. the production of oil & gas, without a size threshold. A detailed breakdown of
unconventional oil & gas is also provided. In the GOGEL, unconventional oil & gas are classified as such:fracking (in practice, oil & gas from shale and tight reservoirs), tar sands, coalbed methane, extra heavy
oil, ultra deepwater, and Arctic. As described in our Climate Risks Policy, AXA IM has chosen to focus on
fracking, tar sands, and the Arctic categories. We believe they present specific features that warrant agreater attention. We have established our own thresholds for those three categories to build our oil& gas exclusion.

35 AXA IM further strengthens its climate actions to accelerate its contribution to a low-carbon world | AXA IM Corporate(axa-im.com)
36 AXA IM, as of 31/12/2021. The remaining 11% comprise strategies which are out of scope of the policy for technicalreasons (e.g. index funds, Funds of Hedge Funds) and Client Opt-Out. JVs are excluded from this figure.
37 As of 31/12/2021, AXA IM exempted 7 companies. Their financial affiliates are exempted as well, meaning that 13 entities
are exempted in total.

For reference, the scientific committee of the Observatoire de la Finance Durable, in its September
2021 report, proposes a list of unconventional oil & gas that comprises the categories contained in the
GOGEL, with the addition of methane hydrates38.

•

Stewardship▪ Coal – focus on Engagement

To support our commitment to exit coal, an engagement initiative was launched targeting a selectionof issuers that are exposed to coal but lie below our exclusion thresholds. This allowed us to informthem of our decisions, and to request robust transition plans with science-based carbon reduction
targets including for the short and mid-term, including plans to close coal plans by 2030 in OECD and
2040 in the rest of the world and transition pathways in line with the Paris Agreement ambitions.
▪

Oil & Gas – continuing to detail our engagement asks

We have significantly enhanced our Climate risks policy at the beginning of 2022 in order to provide
further details on our engagement asks with regards to the Oil & Gas sector, aiming to cover theirstrategy and target setting, transparency including on CapEx as well as Governance and lobbying.

•

Implementing our Net Zero targets thanks to a combination of quantitative and qualitative
analysis

Recent years have seen growing interest in Paris-Aligned investing. New initiatives and frameworks
have emerged to provide a foundation for new climate-aware investment approaches, and the industry
has voiced greater commitment to incorporating these objectives into their processes. We are
optimistic in the ability of our industry to benefit from the abundance of tools and data. We arecommitted to assessing and integrating climate models but also in engaging with data providers andindustry groups to refine these methodologies. Investors are beginning to move from commitment toaction and they must make important decisions about what tools to use and how to deploy them. At
AXA Investment Managers, we propose to start from a set of principles guiding our decision-making
and framing the selection of tools and KPIs to achieve portfolio alignment. We believe that by following
these principles we can most effectively navigate the evolving landscape and constructively tackle thechallenge of aligning our strategies with the Paris Agreement.

AXA IM Climate coloring system
Corporates that are engaged in a robust decarbonization pathway are positively contributing toenvironmental sustainability in a way that is consistent with a Net Zero emissions future. In thatperspective and to support the implementation of its Net Zero commitment, AXA IM has developed in
2021 a “climate coloring” framework inspired by the Paris Aligned Investment Initiative Net Zero
Investment Framework 39 . This framework will be progressively ramped-up over 2022 for a future
implementation, and will be used to inform portfolio managers’ investment managers, with binding
criteria for Net Zero strategies (see below). It is also a key pillar of our Net Zero targets.
Our approach aims at assessing the maturity of the climate strategies of corporates, using quantitative
information on issuers’ climate strategy (incl. SBTi, TPI, CI trend, etc.) combined with qualitative analysis
38 Avis et recommandations - Finance durable (observatoiredelafinancedurable.com)
39 Paris Aligned Investment Initiative – Investing for a net zero future

to confirm the credibility of the strategies in particular. Based on this analysis, issuers are categorized
in the following “colors”:•

Corporates that are already well positioned to reach carbon neutrality with carbon intensity
currently consistent with their 2050 sector target are “Dark Blue”;•

Corporates that are on track compared to their sector. They have either carbon targets approvedby Science Based Target Initiative (SBTI) or are well rated per Transition Pathway Initiative (TPI)or attaining carbon intensity close to sector’s decarbonization pathway, or their carbon intensity
is reducing in line with Net Zero pace. They are categorized as “Blue”;•

Corporates that have credible decarbonization targets and/ or are SBTI committed are
categorized as “Light Blue”. Climate Solutions providers are also categorized as “Light Blue”;
Corporates which have set an explicit Net Zero intention but have not provided sufficient andcredible information on trajectory are categorized as “Orange”; andCorporates which have not set targets are categorized at “Red”.

••

Source: AXA IM Climate coloring system, based on PAII Net Zero Investment Framework, 2021. For illustrative purpose only.

Developing our Net Zero range
Fund in our Net Zero range, which is being developed in 2022, will rely on the climate coloring systemwith the objective of investing mostly in issuers which belong to the different shades of blue. In addition,
they will use a “carbon intensity budget” approach meaning that the portfolio’s WACI will be expected
to remain at all times below this budget, defined as a starting point -30% below its benchmark anddecreasing by 7% every year. The Carbon intensity is computed as WACI (AuM Weighted Average ofCarbon Intensities of held issuers) over scope 1 & 2 GHG emissions on data available with no imputation
for missing carbon intensity values (which implicitly assumes that unreported carbon intensities are
similar to rest of portfolio, resp. rest of benchmark). Relevant/total scope 3 will be monitored andreported for information.

2.3 Biodiversity Strategy
Over the past years, at AXA IM we reinforced our efforts to better integrate biodiversity considerations
in our research, engagement and investment processes with the conviction that:• Biodiversity loss represents a risk to investment returns
o All economic activity ultimately depends on Nature: Biodiversity loss affects thebusinesses we invest in, and hence represent a risk to our investment returns

o A 1.5 times global GDP risk: estimated to be worth $150 trillion annually40, ecosystem

goods and services loss represents an understated risk for both investors and companies•

Fighting biodiversity loss represents one of the biggest transition challenges and opportunitieso•To save biodiversity, around US$200-300 billion per year should be allocated tobiodiversity solutions41

Beyond financial considerations, biodiversity is at the basis of sustainable developmento Biodiversity ensures functioning of ecosystem services, which underpin human well-being and livelihoods vital to the achievement of most SDG.
Provided its fundamental importance for human society and economies, biodiversity is linked directly or
indirectly to all the 2030 Sustainable Development Goals (SGDs), and more particularly to:
SDG 14 and SDG 15 but also, SDG 12
as well as SDG 13; SDG 6; SDG 3; SDG 2, etc.

In 2021, we signed the Finance for Biodiversity Pledge signed by AXA IM in June 20214243 which steers
our Biodiversity strategy. We consider investors have a role to play to:•

Better understand drivers of biodiversity loss and impacts on biodiversity by different sectors•

Engage with companies to reduce their negative impacts on biodiversity and increase theirpositive contribution•

Incorporate biodiversity criteria in risks and opportunities assessment as part of investment
analysis•

Set targets and direct capital to resolve biodiversity loss.

A key challenge we face is that we currently miss commonly accepted and well-developed tools andmetrics to measure biodiversity performance. However, this does not prevent us from accelerating ourefforts in the field of biodiversity since 2020, which is why we are adding a new section to this report.
In 2021, in light of this commitment, we focused our efforts on:
1. Pursuing our research efforts and engagement activities to identify drivers of biodiversity loss
and how sectors are impacted.
2. Supporting the development of metrics to measure the impact of issuers on biodiversityand
identify key pressures, as described in the section 4- Metrics, understand associated risks andopportunities to direct our investments.
3. Implementing an enhanced policy on deforestation & ecosystems conversion

40 The Biodiversity Crisis Is a Business Crisis | BCG
41 Crédit Suisse and WWF Switzerland, ”Conservation Finance Moving beyond Donor Funding toward an Investor-Driven

Approach”, 2014, https://www.cbd.int/financial/privatesector/g-private-wwf.pdf
42 Signatories – Finance for Biodiversity Pledge
43 Stewardship & Engagement | Responsible Investing | AXA IM Corporate (axa-im.com)

1. Research and Engagement

Engagement

2021 progress on Biodiversity
Research and Expertise

In 2021, a specific engagement program waslaunched targeting a selection of companies
identified under the criteria of the AXA IM new
Deforestation and Ecosystems Protection Policy.
The companies selected develop activities
related to key raw materials associated with therisk of deforestation and ecosystems conversion(soy, timber, palm oil and cattle). A special
engagement questionnaire has been developed
informed by our knowledge sharing with CDP andWWF. The program will be pursued during 2022.

In 2021, AXA IM has signed the Finance for
Biodiversity (FfB) Pledge. As part of FfB
Foundation, supporting organisation under the
Pledge, AXA IM chairs the investors’ working
group on biodiversity impact metrics and actively
participates in the working groups on corporate
engagement and advocacy.

During 2021, under the leadership of AXA IM theworking group on impact assessment launched apublic consultation on biodiversity approaches
by financial institutions44. In 2022, the results ofthe consultation will be used to design a firstinvestor guide on biodiversity integration. In
Throughout 2021, we have been working
parallel, AXA IM has also been contributing to
together with 11 other investors on a setting up
development of the FfB engagement guideof a new biodiversity - focused global
published in April 202245.
collaborative engagement initiative to drive
nature action expected to be launched in 2022.46
These actions are all part of AXA IM work to align with the long-term goals on biodiversity of theConvention on Biological Diversity (CBD)47, the overall objective of which is to encourage actions, which
will lead to a sustainable future. To protect biodiversity, we need to measure and identify the causes ordrivers of biodiversity loss to be able to act on them. The Intergovernmental Science-Policy Platform on
Biodiversity and Ecosystem Services (IPBES) identifies 5 direct drivers of biodiversity loss linked tohuman socio-economic activities, among them: land use and sea use change, direct overexploitation ofnatural resources, climate change, pollution, and spread of invasive species.
The degradation of natural ecosystems causes important environmental and social risks across theworld as well as significant economic risks related to potential strong fluctuations in raw material costs,
disruptions in operations and supply chains, etc. All this in the context of transition risks related toincreasing regulation on biodiversity restoration around the world. Those who will seize this transition
opportunity first will win economically while bringing real solutions to preserve our living conditions.
Such industry initiatives as SBTN (Science-Based Targets Network)48 or TNFD49 (Taskforce on NatureRelated Disclosure) have started to gather evidence on the capacities of businesses and investors to act
on biodiversity and to reach the UN CBD global goals. The purpose of the new post-2020 Global
Biodiversity Framework (GBF)50 being developed today, namely via the COP15 taking place in 2022, is
44 Consultation outcomes on finance sector biodiversity measurement – Finance for Biodiversity Pledge
45 Guide on engagement with companies – Finance for Biodiversity Pledge
46 Global investors developing new collaborative engagement initiative to drive nature action – Finance for Biodiversity

Pledge47 Convention on Biodiversity | United Nations
48 The Science Based Targets Network (SBTN) - Science Based Targets
49 TNFD – Taskforce on Nature-related Financial Disclosures
50 First draft of the post-2020 global biodiversity framework (cbd.int)

to propose concrete targets and mechanisms guiding private sector contribution to reverse biodiversity
loss.
To be able to fully contribute to global biodiversity protection goals financial institutions clearly needtools and data adapted to track drivers of biodiversity degradation and, thus, to measure contributionof each issuer or sector to biodiversity loss - biodiversity footprint.
2. Exclusion
AXA IM has been sensitive to the topic of deforestation for a number of years and implemented an
exclusion policy for investments related to palm oil production in 2014. In 2021, AXA IM decided toextend its palm oil policy to a more comprehensive deforestation and ecosystem protection policy51.
AXA IM considers that investment in companies which have a critical impact on forests according to the
Carbon Disclosure Project (palm oil, timber products, cattle products, soy and rubber) and are involvedin controversial practices should be avoided. Beyond this targeted exclusion AXA IM continues toencourage and promote the dialogue with companies involved in deforestation issues, in order tochange practices52.
Moreover, AXA IM values forestry and natural capital as an asset class and is likely to pursue
investments into this sector in the future, through its Alternatives investment expertise.
AXA IM is committed to sustainable forest management practices and pursues a rigorous policy as partof its forest investments in selecting its assets and its forest management partners, and in adapting
management practices to meet these global challenges.
Specifically, investments in private assets catalyse solutions that promote mitigation, adaptation andresilience in relation to climate and biodiversity. Strategies such as the “Climate & Biodiversity” strategy
focuses on solutions that promote: Conservation of Natural Capital; Resource Efficiency; and Resilienceof Vulnerable Communities to the effects of climate change and biodiversity loss. Our mission has beentranslated into real world activities that lead to the conservation of natural capital, protection of critical
habitats, and climate mitigation globally.
In our existing assets, AXA IM is committed to Improved Forest management (IFM) and Biodiversity
improvement.
Improved Forest Management (IFM) of natural forests can result in greater levels of storage of carbon
while maintaining wood production over the long term. Some of IFM techniques adopted by AXA IM
include:• Extending harvest cycles to allow trees to grow larger before they’re felled, increasing the
average carbon stock across a working forest• Thinning of competing trees and vegetation to allow trees to grow faster and bigger• Managing conservation zones within forests to support ecosystems• Keeping the healthiest, most diverse trees of all size classes and harvesting the rest
• Properly identifying commercial species prior to cutting so that non-commercial trees are
not cut down and abandoned

51 AXA IM expands its palm oil policy to protect ecosystems and fight deforestation | AXA IM Corporate (axa-im.com)
52 Stewardship & Engagement | Responsible Investing | AXA IM Corporate (axa-im.com)

Our approach to biodiversity management reinforces our leadership in experimenting with new waysof maintaining forests for better resiliency, further explore the biodiversity conservancy role of theforests and educate the wider public on the many roles of the forest, specifically:••

Find the best silvicultural scheme for long lasting reconstitution and biodiversity
preservation
Measure reconstitution and biodiversity

In 2021, AXA IM reinforced its commitment to the forestry and natural capital asset class achieving arecord level of investment and growing the underlying portfolio by over 30%. In addition, we delivered
100% certification of all forest assets under either PEFC or FSC certification in 2021, with all Irish forests
certified by the end of 2021
It is our conviction that the forestry and natural capital asset classes are material to future value, andthis is reflected in our ongoing investment into these sectors. 2021 saw AXA IM responsible forapproximately 13% of annual worldwide transactions, diversifying our portfolio into new forest species,
new continents and new locations, including the acquisition of over 25,000 Hectares, (from c.59 000 ha
toc. 84 000 ha) and, though our policy of targeting lower harvesting than natural growth, it is estimatesthat the standing stock of our forests, excluding new acquisitions, is estimated to have sequesteredapproximately 188 840 tons of carbon dioxide, net annual harvesting.
►Vision for 2022

Starting in the second half of 2022, AXA IM will progressively publish a new version of its ESG/Impact
report on an individual fund level, which will include a biodiversity footprint at fund level based on
the methodology described above. We will publish this new and innovative metric for each of ourfunds (AXA IM Core perimeter) as soon as coverage of at least 10% in CBF data is reached. As regards
those funds where the coverage threshold has not been reached this is mostly explained by the
specificities of asset classes, instruments or issuers invested in. This new metric is used for reporting
purpose only.
AXA IM sees supporting development of biodiversity-specific metrics and tools as important to allow
progress on biodiversity impacts measurement.
CBF may help to track negative contribution of our investment activities to biodiversity conservation.
The latter represents the key long-term goal set by the Convention on Biological Diversity (CBD). Withthe use of CBF metric we may identify risks of biodiversity degradation and by encouraging issuers
exposed to these risks to make a transition towards a more sustainable economic activities respectfulof human life and nature. Thus, at this stage, we see the following possible applications for IDL
biodiversity data as part of our AXA IM natural capital protection approach:▪ Identify potentially most impactful sectors / issuers and inform our shareholder engagement
practices on the matter of biodiversity▪ Continue to test biodiversity data and develop internal biodiversity research
Now at experimental phase, we will continue to work with IDL in 2022-2023 on:▪ Methodological solutions to integrate biodiversity loss drivers not yet included: invasive
species, sea use change, ocean pollution, overconsumption of natural resources, etc.
▪ Methodological solutions on estimation of biodiversity dependencies and positive impacts
In 2022, we also expect to develop our knowledge in the field of social issues associated withbiodiversity loss. Clearly, the loss of biodiversity may accentuate such social issues as the ones related
to Human Rights, responsible consumption, as well as access to water and food (both variety andquality), proper hygiene and sanitation, security and health risks, population movements due toecosystems degradation and climate modifications, etc. We are working to progressively include
social aspects related to biodiversity loss and deforestation into our research and engagement
activities.
Moreover, we see the mobilisation of investors on the matter of biodiversity to continue. AXA IM
conducts constructive discussions on biodiversity topics with CDP, Ceres, Global Canopy, and otherexternal experts and works in collaboration with WWF on specific cases with regards to engagement
on biodiversity-related topics as well as with regards to analysis and interpretation of the IDL
corporate biodiversity footprint. We participate actively in the industry-leading initiatives like the
Finance for Biodiversity Foundation, organisation supporting the FfB Pledge, by driving discussions
on such topics as biodiversity impact metrics. We expect to continue these activities further.

2.4 Just Transition“Just Transition” getting very real
Gilles Moëc, AXA Group Chief Economist and AXA IM Core Head of Research
The ongoing decline in real income triggered by the spike energy prices would be particularly acutefor the poorest members of society were it not for the government fiscal response. We may see thisas a “dress rehearsal” for a more permanent tension between the necessary fight against climatechange, which may well come with a rise in the overall level of consumer prices on trend, and social
fairness. The “just transition” issue – i.e. the need to preserve social cohesion as the economy moves
towards net zero – is no longer theoretical. Hard choices are ahead.
Fundamentally, climate change is a negative externality. In clear, it means that, if kept unchecked, it
will ultimately come with a cost to collective welfare which is not “chargeable” to anyone in particular(and that’s precisely why GHGs emissions would continue in an uncontrolled manner). Fighting global
warming entails “internalising the externality” or, translated into less pompous words, it means
revealing the future cost in today’s prices so that behaviours can change in time. The European Union
has taken the lead on this by putting together the largest and most efficient carbon trading systemin the world, the ETS. The EU sets an overall limit to the carbon issuance of key sectors, andbusinesses are then free to trade those “carbon credits”, generating a market price. Reflecting thepolicy push towards decarbonisation, the price of carbon has increased over the last 2 years and the
EU is working on an extension to more sectors of the economy. Still, using the latest academic
estimates of the price of carbon consistent with a trajectory to net zero by 2050, the market priceneeds to rise further, to probably exceed 100 euros par ton.
If we put a price on carbon someone must pay for it, and there is every chance that the final
consumer will be the payer, as carbon prices work their way through producers’ input prices. Anotherway to “internalise the externality” is to directly add a premium on heavily carbonated retail prices
to fund the emergence of decarbonized options. The bill can be hefty. In Germany, at the peak of theshift to renewable energy – which is still incomplete given the country’s continued reliance on coal –households were paying a premium on their electricity bill equivalent to a full percentage point of
their disposable income.
Ultimately, the transition will work if consumption and investment shift from heavily carbonatedoptions to better ones. An issue is that the decarbonized solutions are often more expensive – atleast transitorily. To take a concrete example, at the point of purchase, the price of an electric car
before tax and subsidy is higher than the price of a traditional combustion engine car. Governments

can incentivize consumers to shift to the green option by levelling its price, in practice by levying a
tax on the combustion engine cars to fund a subsidy for the electric ones. The problem is thatdynamically, this can’t be neutral for public finances: as people start buying more green cars, there
are less traditional cars to tax.
Down the road, a net zero trajectory can work in a way which does not elevate the global price level
only if the price of green options before tax subsidy falls quickly enough. In theory this will be case,and examples abound – e.g. the steep decline in the price of solar panels as the technology went
mainstream and economies of scale kicked in – but bottlenecks may appear. For instance, an acuteissue now is that some green solutions are dependent on “rare earth” materials which prices haveshot up.
Still, the “Just Transition” issue cannot be ignored since a fair distribution of the cost of the transitionis crucial to its success. The conversion of public opinion to the decarbonization of our economies isvery new, incomplete in many countries and fragile everywhere. Sustained political support to thenet zero trajectory is needed, and glaring inequalities in how the shock is apportioned could stop theprocess in its tracks. When it comes to ESG, the “E” pillar cannot leave the “S” one on the sidelines.
At the business level, this means a properly integrated strategy mixing environmental and social goals
is necessary.

2.5 Responsible Investment Offering
In an environment where EU and national regulators are putting in place new standards andrequirements notably to address greenwashing concerns, AXA IM continually improve its RI categories
to ensure they follow regulatory requirements and are clear and understandable by clients. These
categories consider the EU Sustainable Finance Disclosure Regulation (“SFDR”), and state of knowledge
at the time of enforcement of SFDR regulation on March 2021, as well as the AMF Doctrine 53 andsustainability-related labels.
This classification system will evolve in 2022 to integrate new requirements of existing and upcoming
sustainable-related regulations.

53 “Autorité des Marchés Financiers”, the French regulator, which issued its 2020-03 position-recommandation in March

2020 Informations à fournir par les placements collectifs intégrant des approches extra-financières | AMF (amf-france.org)

Source: AXA IM as of 31/12/2021. Non audited figures. Inclusive figures with a cumulative approach. More information on
our 2021 key figures in our Full-year 2021 earnings press release54.

1.

ESG Integrated Family of Funds:

These funds use data and research, exclusions and proactive stewardship to help build ESG into theinvestment process, and promote environmental and social characteristics in our approach. To do so
we draw even more attention to sustainability risks for these funds, excluding issuers that have thelowest ESG scores as well as those which do not follow what we consider good governance practices.
We believe that this level of ESG integration can potentially reduce risk to help us achieve better riskadjusted returns.
Within this group, funds in the ESG Integrated+ category go a step further by aiming at outperforming
their ESG Score compared to their benchmark or universe55.
2.

ACT Family of Funds:

Going even further, our ACT range is designed to help clients target specific ESG goals around issues
such as climate change and inequality while continuing to adopt the reinforced approach tosustainability risks and good governance practices as described above. Alongside financial returns,
these funds target positive outcomes related to ESG criteria and/or to the United Nations Sustainable
Development Goals (UN SDGs). Investment decisions are guided by both the financial and impact goals.
Within this family are two categories:••

Sustainable funds (€ 40bn at end 2021) aim to embed ESG into the portfolio construction
process, in an even more material and intentional manner. Every fund in this group targets one
or more specific objectives related to the ESG pillars (for example, carbon footprint) to further
refine the investment universe.
Impact funds (€ 3.7bn at end 2021) incorporate the demands of the Sustainable category but
will seek out businesses and projects that can potentially have an intentional, positive,

54 Full-year 2021 earnings | AXA IM Corporate (axa-im.com)
55 When in scope of the AMF Doctrine 2020-03, those funds belong to the second category (“not significantly engaging”)

measurable and sustainable impact on society and/or the environment. These funds will also
report against impact criteria aligned to specific UN SDGs.

Focus on AXA IM SFDR categorisation as of 31/12/2021(for strategies in scope of the regulation):
Classification approach for Level 1:
In March 2021, at the time of entry into force of the new European regulation on “sustainability‐
related disclosures in the financial services sector” (Regulation (EU) 2019/2088 or “SFDR”), weclassified our financial products based on the state of the knowledge of the requirements of SFDR
with the objective of ensuring transparency on the way our financial products integrate, promote
and/or contribute to environmental and/or social characteristics while such requirements were
unclear as the regulatory technical standards (SFDR Level 2) were not yet stabilized and publishedand could potentially impact the SFDR classification of our products. Ever since then, in an effort tobe as transparent and clear as possible with our clients, we are informing our investors that SFDR
classification is based on our interpretation of this “level 1” of SFDR and may evolve over time toreflect regulatory guidance and/or market views.
Implementation challenges
SFDR’s categories for financial products (Articles 6, 8 and 9) were designed to specify the scope,
content and details of disclosure requirements applicable to financial products depending on theextent to which sustainability considerations are part of their investment process. They do nottechnically provide clear definitions for SFDR product categories.
The scope of the product categories set forth by SFDR is broad]. Such categories rely on concepts
which are not defined in a detailed manner in the regulation at this stage, such as the “promotion ofenvironmental and social characteristics” for Article 8 products and an approach to “sustainable
investment objective” for Article 9. This lack of precision results in differences in interpretation acrossthe markets
SFDR categories for AXA IM Core (data as of 31/12/2021 – in terms of AUMs):• 12% (€55bn of assets under management) of AXA IM Core’s financial products integrate andassess sustainability risks only without promoting environmental or social characteristics or
having a sustainable investment objective and are therefore categorised as Article 6• 88% (€406bn of assets under management) of AXA IM Core’s financial products either
promote environmental or social characteristics and are ESG integrated or demonstrate asustainable objective and are therefore categorised as respectively Article 8 or Article 9.
•

SFDR categories for AXA IM Alts (data as of 31/12/2021 – in terms of AUMs):• For AXA IM Alts, due to the nature of the Alts assets and the lack of or inconsistency ofavailable data, Alts financial products are mainly classified as Article 6 integrating andassessing sustainability risks only without promoting environmental or social characteristics
or having a sustainable investment objective. Implementation of SFDR level one resulted in
13% of eligible financial products being classified as article 8 or 9 within AXA IM Alts.
• AXA IM Alts’ Articles 8 and Articles 9 funds focused on:▪ 22% (€17bn of assets under management) of AXA IM Real Assets financial
products are categorised as Article 8 or 9.
▪ 1% (<€500M) of Structured Finance financial products are categorised as Article
8 or 9.
To the extent SFDR has been applicable for a relatively short period of time, the classification under SFDR is subject toadjustments and amendments, as certain aspects of SFDR may be subject to new and/or different interpretations than thoseexisting at the date of this Report. As part of the ongoing assessment and current process of classifying its financial products
under SFDR, AXA IM reserves the right, in accordance with and within the limits of applicable regulations and legal
documentation applicable to its financial products, to amend the classification of a particular fund to reflect changes inmarket practice, in its own interpretations, in SFDR-related laws or regulations or in currently-applicable delegatedregulations, in communications from national or European authorities or court decisions clarifying SFDR interpretations.
Investors are reminded that they should not base their investment decisions on the classification presented pursuant to
SFDR.

As part of the application of the Article 29 of the Law No. 2019-1147 of 8 November 2019 relating to
the Energy and the Climate, assets managers are required to publish on their website the list of financial
products Article 8 and Article 9 funds under the Regulation (EU) 2019/2088 of the European Parliamentand of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services
sector. This list is available on our website.

Sustainability-related Labels
Several funds managed by AXA IM have been awarded sustainability-related labels. They follow therequirements defined by each of the label rulebooks and are subject to an annual audit by external
auditors. Transparency codes available on AXA IM Fund Center 56 provide more information on theprocesses in place for these funds.
As of 31/12/2021

Sustainable
LabelsLabel ISR57
Greenfin58
Towards
Sustainability

Number oflabelled funds
53
1
16

Net AUM (M€)

As of 31/12/2020

30 078 €1 331 €
8 355 €

Number oflabelled funds
36
1
11

1 102 €

1managed by Labelled funds

Net AUM (M€)
managed by Labelled funds

13 598 €658 €3 841 €

59

FNG60

1

852 €

Focus on Impact Funds – Private Markets
AXA IM has a long history in investing for impact in private markets, with a first fund launched in 2013.
These are investment strategies that aim to generate objectively measurable and intentional
environmental and social impacts alongside financial returns, both integrated into investment
management incentives. These strategies continued to gain momentum in 2020.
Our first strategy, with AUM of €200m, focused on Financial Inclusion, Access to Healthcare and
Education. In 2016, our clients allocated €150m to a new fund, to invest in both environmental andsocial impact generation.
In 2019, we launched our third impact investing strategy focusing on Climate & Biodiversity, with AUM
of $175m, seeking solutions to climate change and loss of biodiversity (see spotlight). In 2020 and our
56 Funds - AXA IM Global (axa-im.com)
57 Label ISR - Pour des placements durables et responsables (lelabelisr.fr)
58 Le label Greenfin | Ministères Écologie Énergie Territoires (ecologie.gouv.fr)
59 Towards Sustainability Initiative | Towards Sustainability
60 Application – FNG-Siegelclients committed an additional $175m to the Climate & Biodiversity strategy and $50m to a fundpromoting financial inclusion and access to healthcare for underserved beneficiaries in Low-and-Middle
Income countries.
▪

Healthcare strategy

In 2021, we launched a Global Health strategy61, which has a mission to ensure healthy lives, promote
well-being and address inequalities in access to quality healthcare. The strategy will contribute tangibly
to SDG 3 Goals and Targets by increasing the availability of innovative products and services targeting
global disease burdens; and delivering solutions at accessible price points by addressing high volume,
mass markets, serving the healthcare needs of the many and not the few.
The strategy will achieve its objective by investing in companies focusing on clinical development or
early commercialization of: Medical Devices, Biopharmaceuticals, Vaccines, and Diagnostics delivering
intentional, measurable, and positive health outcomes relative to the strategy’s priority healthcare
pillars: Women, Maternal & Child; Vision; Infectious diseases; Diabetes/Obesity; and other healthconditions with prevalence in high volume markets.
Our strategy demonstrate the tangible role clients are playing in the achievement of the UN Sustainable
Development Goals (SDGs) through the allocation of much needed capital to underserved social andenvironmental challenges. Our preliminary review of our impact strategy SDG alignment yielded
positive results, demonstrating that our clients are providing capital to businesses that directly address
the SDGs highlighted below.
▪

Deep and credible alignment to the UN SDGs62▪

Impact Performance

Our impact management and measurement framework covers initial assessment, evaluation, due
diligence, investment, monitoring and exit. The objective is to ensure that the generation of impact is
intentional, focused, and a key driver for investment decisions and managing investments over theinvestment period.

61 AXA IM Alts launches $500 million private equity healthcare strategy alongside two senior appointments - AXA IM - Real

Assets (axa-im.com)
62 The targeting of specific SDG does not imply the endorsement of the United Nations of AXA Investment Managers, its
products or services, or of its planned activities and does not constitute, explicitly or implicitly, a recommendation for aninvestment strategy.

The table below shows the contributions of our platform to key environmental and social challengesaligned with the mission of our strategies:
Theme

Deal Type

Geographic
Focus
GlobalClimate andBiodiversity

Equity shares, project
financing, primary funds

Financial
Inclusion

Equity shares

GlobalQuality
Healthcare

Equity shares

Global*▪

KPI
Avoided emissions (tCO2e)Land under sustainable
management (hectares)
Critical habitats protected(hectares)
Avoided waste (tonnes)
Lives Improved
Lives Saved
Lives Empowered
Product Reach (#LMICs)
Number of lives improved
Number of lives saved
Product reach (# countries
reached)Spotlight – Natural Capital Investments

The Climate & Biodiversity strategy was developed in response to increasing concerns about climatechange, its impact on nature and the increasing and resulting loss of biodiversity.
Emissions from deforestation and land degradation are cumulatively responsible for around 20% of
GHG emissions. Beyond the critical contribution to climate mitigation and adaption, forests play afundamental role in water provision, biodiversity conservation and community livelihood.
Developing a solution to these challenges requires an intentional approach to allocating capital tocompanies and projects that conserve, protect, and restore natural capital - forests, preserving nature’s
ability to act as a natural climate solution, and high value habitats necessary for conservation andbiodiversity. Our investments have tackled these challenges by•••financing the direct protection of primary natural capital - e.g. forested land, peatland etc,
mangroves.
implementing sustainable land use programmes which alleviate incursion into protectedprimary natural capital and providing enhanced livelihood for stakeholder communities e.g.
smallholder farmers
contributing to climate change mitigation, evidenced by the issuance of verified emissions
reductions credits and other ecosystems service credits. These credits provide a sustainablemeans for landowners to monetise the environmental benefits provided by their forests while
preserving the significant environmental, biodiversity and social outcomes provided bystanding forests.

We have translated our mission into real world activities that lead to the conservation of natural capital,
protection of critical habitats, and climate mitigation globally. These include:••

Reforestation of degraded lands in Kenya, providing climate mitigation benefits and improved
income resilience for smallholder farmers
Protecting and restoring degraded peatland in Indonesia, preventing the release of CO2 stored
in peatland

•
•
•

•

Conserving family-owned forests in the United States
Preventing the deforestation of Forest Protected Areas in Guatemala, protecting the
MesoAmerican biodiversity corridor
Promoting sustainable agroforestry practices in Madagascar, thereby protecting the rich andunique biodiversity of Madagascar including four lemur species listed on the IUCN Redlist of
Threatened Species.
69,000 hectares of Land under Sustainable Management; 55,000 hectares of Critical Habitats
protected globally63.

Our strategy with its intentional focus on natural capital is contributing to the significant environmental,
biodiversity and social outcomes provided by nature.
The Climate and Biodiversity strategy is making good on its promise to fund credible, investable
solutions that deliver positive outcomes. To date the strategy has made a number of investments thatalign with its Climate and Biodiversity mission. Examples of our investments include:
Investments

Activity description

Expected Impact/ Illustrated
Investments

KomazaA microforestry-to-wood products company with ambitions
to become the largest sustainable forestry company inAfrica. Our investment
will contribute to reforestation of degraded lands; mitigate
climate change using trees as a natural carbon
sequestration solution; and build climate-resilience,
through aligning the financial interest of local communities
with conservation.

Impact targets:• 37,000 hectares under improved
management• 17.5m tons of Carbon Emissions
Sequestered• 50,000 farmers with improved
incomeForest Carbon
Indonesia

Project developer specialized in the conservation andrestoration of degraded tropical forests, peatland andwetland ecosystems in Indonesia, Malaysia and Cambodia.
The company has operated for more than ten years with its
most notable project to date being the Sumatra MerangPeatland Project in Indonesia. This project led to therestoration of over 22,000 hectares of peatland forest, thedelivery of close to 7m tons of CO2 emissions reduction (asevidenced by the generation and sale of verified voluntarycarbon credits), and the strengthening and conservation ofover 20 species.

Impact targets:• 74,000 hectares of peatland,
mangrove and tropical forests
conserved/restored• 26m tonnes of Carbon Emissions
reductions• 22m verified carbon credits
generated and• A minimum of 10 IUCN Red List
endangered species protected,
including the Bornean Orangutan,
Proboscis Monkey, Sumatran Tiger,
and the Irrawaddy Dolphin

Sanergy

Madecasse

Sanergy was founded in 2011 with the objective ofimproving waste management systems in Kenya, Sanergy
adopts a circular economy approach, collecting andtransforming sanitation and organic waste and into
sustainable, environmentally-aligned products such as
insect protein for animal feed, organic fertilizer, andbiomass briquettes
Madecasse is a cocoa bean-to-bar chocolate company
working with smallholder farmers primarily in Madagscar to
implement sustainable agroforestry practices that enables
the conservation of habitats to support Madagascar’s
unique biodiversity, where 85% of the country’s plant andanimal species are found nowhere in the world.
The company

Impact targets:• 1.2m tons of waste processed• 50,000 tons of bio-fertilizer
produced

Impact targets:• 528 hectares of critical habitats forbiodiversity conserved

63 This figure represents aggregate impact numbers as disclosed by investee companies and projects.

Fundaeco

Fundaeco’s operations focus on the creation, management
and conservation of Forest Protected Areas in Guatemala.
These Protected Areas are of significant global ecologicalimportance, acting as habitats for critical species andproviding a natural carbon sequestration solution,evidenced by the issuance of verified carbon credits.

Impact targets:• 60,500 hectares of land undersustainable management• 4.6m Tonnes of carbon emissions
avoided• 4.1m verified carbon credits
generated

Sistema Bio

Sistema works with small-holder farmers in Latin America,
India and East Africa to tackle methane emisions fromwaste within their operations. Sistema’s biodigesters
provide a sustainable solution to the treatment of organic
waste, sequester methane from manure that would
otherwise be emitted into the atmosphere; and theresulting biogas and biofertilisers provides low-carbon
alternative to fossil-fuel derived products for the farmers.

Impact targats• 5m tonnes of waste treated• 200m cubic metres of biogas
produced• 16m tonnes of biofertiliser
produced• 1.8m tonnes of carbon emissions
avoidedAXA Investment Managers is a founding Signatory to the Operating Principles for Impact Management(Impact Principles). AXA IM publishes an annual Disclosure Statement affirming the alignment of the
impact measurement and management system of AXA IM Alts Impact Investing Strategy with the
Impact Principles. An independent verification of our impact management systems was conducted by
EY Associes in 2020 and confirmed to be aligned with the Principles.

Focus on Impact in Listed Markets
5 strategies were part of the Listed Impact category at end 2021.
Strategy64
HumanCapital(equity)SocialProgress(equity)

Underlying investment
theme
Promoting Human capital asa key asset of small and midcap European companies

The strategy seeks to invest
in developed and emerging
markets publicly listedcompanies that offer growthpotential as they focus onproviding services across a
range of social needs
including education,
healthcare/wellbeing,
infrastructure

Labels65

KPIs66

SDGs67-

Carbon Intensity

-

Women
Board

-

Carbon Intensity-

Water Intensityon

64 The products above may not be registered nor available in your country.
65 As of 31/12/2021
66 As of 31/12/2021. In line with the Label ISR rulebook V2, funds selected their first KPI on the 31/12/2020 and their second

KPI on the 31/12/2021.
67 Disclaimer: The targeting of specific SDG does not imply the endorsement of the United Nations of AXA Investment Managers,
its products or services, or of its planned activities and does not constitute, explicitly or implicitly, a recommendation for aninvestment strategy.

CleanEconomy(equity)

GlobalGreen
Bonds(bonds)Multi Asset
Optimal
Impact(MultiAsset)

Population growth and rising
wealth continue to increasedemand for energy,transportation, food andwater.
Growing social awareness ofthe pressure on scarcenatural resources andgreenhouse gas emission
reduction is influencing statepolicies (ie Paris Agreement
to keep the temperature rise
below 2°c) and infrastructure
investments, ultimately
encouraging corporates to
act rapidly
Investing in green bonds
supporting the developmentof environmental projects
with a proprietary analyticalframework
Combining our two impact
proprietary approaches onlisted assets to selectequities and Green, Socialand Sustainability bonds
providing positive andmeasurable impact
addressing societal
challenges around“prosperity for people” andthe “prosperity for theplanet”-

Carbon
Delta
Technology
Opportunities
1.5°C

-

% of companies
inthe GSS
Watchlist&
Non-compliant-

Carbon
Delta
Technology
Opportunities
1.5°C

-

Carbon Intensity

Impact Philanthropy Mechanism
In 2020, to further deliver a positive impact on society in the long-term, AXA IM implemented an
innovative philanthropic mechanism for its impact fund range, across listed and private markets.
5% of this range’s management fees are now used to fund additional projects aimed at developing
solutions with a societal impact. These projects are focused on the themes which are at the heart of
AXA IM’s Corporate Responsibility and Responsible Investment strategies, and aligned with selected UN
SDGs, such as:• SDG 3 – Good Health and Well-Being• SDG 4 – Quality Education• SDG 13 – Climate Action• SDG 15 – Life on Land

Partnerships with four charities have been put in place thanks to the mechanism:
Missions
Charity
EPIC

Epic aims at supporting the development of a world
A world in which every child and youth has access tosafety, empowerment and equal opportunity. To doso, it finds, selects, backs and monitors high impact
organizations in order to catalyze their impact onunderserved children and youth and the systems
affecting their lives. It relies on a thorough andcutting-edge sourcing, vetting and monitoringprocess, bringing trust, transparency andaccountability.

World Land Trust

World Land Trust is an international conservation
charity that protects the world’s most biologicallysignificant and threatened habitats. Through a
network of partner organisations around the world,
WLT funds the creation of reserves and provides
permanent protection for habitats and wildlife.
Partnerships are developed with established andhighly respected local organisations who engage
support and commitment among the local
community. In 2019, WLT supported the restorationand conservation of 38,000 acres, across 22
countries and 82 reserves, also planting 39,000
trees.

SDGs68

Ligue pour la Protection LPO is one of the oldest nature conservation
association in France and is affiliated with thedes Oiseaux
BirdLife International network, LPO implements
national restoration projects for some of France’s
most threatened birds, coordinates European
species conservation programmes and manages thereintroduction of endangered birds.
LPO manages over 24,000 hectares of natural capitalspread over 27 nature reserves in France.
Doctors with Africa

Doctors with Africa CUAMM cooperates with local
hospitals, health centers, villages and universities, toimprove the health conditions of the mostvulnerable communities of Sub-Saharan Africa. The
organization designs and implements healthcare
cooperation projects, also carrying out capacity-

68 Disclaimer: The targeting of specific SDG does not imply the endorsement of the United Nations of AXA Investment

Managers, its products or services, or of its planned activities and does not constitute, explicitly or implicitly, a recommendation
for an investment strategy.

building activities and conducting and disseminating
scientific research.

2.6 CSR Strategy
At AXA IM our purpose, to ‘act for human progress by investing for what matters’, is central to every
action we take as an investor - but equally as an organization and employer. As an organisation, we
believe we have a powerful role to play in finding solutions for the most pressing current and futuresocietal challenges - and by collaborating with others, build a fairer, more environmentally sustainable
and resilient world for our clients, employees and broader society. Just as we are an active player in
responsible investment, we equally recognise our role as a business and employer to hold ourselves tothe same high standards that we ask of others. Our framework is aligned with the United Nations’Sustainable Development Goals (UN SDG) and based on the same ESG framework that we adopt as aninvestor.
▪

Environmental

Our transition to Net Zero – measuring and reducing our impact
As a leading responsible asset manager, we recognise our role in leading the transition to a low carbon
economy, as both an investor and organisation. As a business, we have committed to become net zeroby 2050 at the very latest. To achieve this, we are working on a programme to measure and reduce
our footprint across all key emissions, with an initial milestone of 25% reduction by 2025 compared to2019.
To provide transparency and accountability on our net zero journey, we now measure our global
footprint annually across our 23 offices in 18 countries and will communicate annually on our progress.
This measurement study is managed and verified by offsetting provider ClimateSeed, to ensure theaccuracy and integrity of the data collection. With our footprint calculated at a global and country level,
we are currently working with each of our country management teams, to build a CO2 reduction
roadmap per region – setting goals that are fair but ambitious across key emissions of energy, water,
waste, paper and business travel.
Incorporating Scope 3 emissions into our reduction targets
We have been measuring Scopes 1 & 2, and business travel as a business for almost ten years now.
However, we recognise the increasing need to account for the emissions incurred across our entire
value chain, known as Scope 3 emissions. We can also see that the shift in working patterns post
pandemic requires us to account for an increasing number of hybrid or digital only activities and events,
many of which take place outside the scope of our own office emissions measurement. In 2021, we
have therefore included into our measurement study all Scope 3 emissions beyond business travel –including our supplier chain, home working, digital tools, client and corporate events and our own office
refurbishment programmes.
Our ‘Smart Working’ framework enables our teams to work both from home or the office and benefit
from increased flexibility and greater work/life balance. In parallel however, we recognise that this isan additional source of emissions, beyond our traditional offices. We have therefore worked with our
employees globally to estimate the emissions incurred through their home operations in 2021 andincluded this in our measurement. We have also taken steps through our digital strategy, to reduce
email consumption through the introduction of the collaborative tool MS Teams and are working on
further activities to reduce our digital footprint through the lifecycle management of our devices.

Our scope 3 emissions also include the footprint generated by the activities of AXA IM providers andsuppliers. We now measure this footprint and will continue to find ways to encourage all those whowork with us to manage their own operations for us as sustainably as possible.
On business travel, we are currently working to an initial 25% reduction milestone (vs 2019) on all
business travel globally. In context, our footprint on travel was far lower in 2020 and 2021 due
specifically to the pandemic, but we are keen to leverage the subsequent evolution in our digital tools
and increased home working, to prioritise critical travel only and see if we can reduce further on our
initial target. We are currently working with our management teams across AXA IM to define targets
and refine our travel policy, to favour less CO2 intense forms of travel and less travel overall, leveraging
instead digital solutions to replace some of the face-to-face meetings.
Office emissions
As part of the ongoing management of our environmental impact, we continually seek further ways toimplement recycling and energy saving schemes across our offices, in order to achieve a reduction inenergy, paper consumption, waste and water. We are currently working to a minimum 25% reduction
across our largest offices (vs. 2019). In parallel to our efforts to reduce our impact, we want to leadthe transition to more renewable energy. AXA IM is aligned with RE100, which brings together
influential businesses committed to renewable energy and we are currently 100% renewable energy
across our three largest offices. We are now exploring with AXA Group how we can achieve 100%
renewable energy in our European offices by 2025.
Offsetting only as a final step in our roadmap
Our goal is to reduce our emissions to the absolute minimum required and achieve Net Zero by 2050
at the very latest. However, whilst we do so, we must continue to account for the emissions wecontinue to incur across our Scope 1, 2 and 3 operations. We do not believe that offsetting is a solution
to the climate crisis but we equally recognise that we will never be able to run our business with zero
emissions. We will therefore offset any emissions that cannot be removed each year, while ourcommitment is primarily to first reduce our footprint to the absolute minimum. In 2021, we offset an
initial 15,000 tCO2e - based on the data collected at that time - into carbon credits, via our offsetting
provider ClimateSeed - supporting a large conservation project in Guatemala. Recognising however that
we need to go further and account for all emissions across scopes 1, 2, and 3, we will work closely with
our partner ClimateSeed following the results of our CO2 measurement to ensure we account for ouremissions year on year.
Key to reaching net zero by 2050 is employee awareness of the climate and the impact we collectively
have on the planet. Recognising this, one of the objectives of our parent AXA Group is to train 100%of our employees on climate by 2023 through the launch of the AXA Climate Academy, which AXA IM
is fully aligned with.
▪

Social

Our people are our most valuable asset. We thrive to nurture the progress of our employees bydeveloping a work environment in which they can realise their potential to drive progress and bring our
purpose to life every day.
Empowerment and inclusion are central to the culture we want to create at AXA IM

We want to provide our talented employees with the opportunity they need to grow their potential,
shape the way they work through flexibility/hybrid working and thrive within a diverse community
where differing ideas, backgrounds and viewpoints are encouraged. We actively listen to ouremployees, to understand how they feel about the work that we do and their role in driving ourorganisational purpose. We conduct two to three engagement surveys per year, in which we measure
the eNPs (Employee Net Promoter Score) and have seen a year-on-year score increase since 2017. We
support a culture of open feedback on topics such as gender, disability and ethnicity and conducted our
first ‘Inclusion Survey’ in 2021.
On Inclusion and Diversity, we also use our voice as a leading asset manager, to push for progress on
key topics, such as gender equality, disability, LGBT, to name a few. On gender, we publish our own
pay gap reports annually in France and the UK and we are members of the 30% Club Investor Groups
in France and the UK, which look to increase the representation of women in executive management.
We have also signed the Women in Finance charter and are EDGE (Economic Dividends for Gender
Equality) certified. We have also begun the process of Edge re-certification in 2022, in recognition of
our global commitment to gender equality in the workplace.
Protecting the rights of all those who work with us
We are committed to disclosure as required through regulation, in all geographies in which we operate.
This includes the Modern Slavery Act (UK) and any others pertaining to Inclusion & Diversity or humanrights. Whilst already considering ourselves compliant, we are currently assessing in particular thescope and implementation of the incoming ‘Loi Rixain’ (‘Rixain Law’) in France, which addresses theneed for increased transparency on D&I metrics in the workplace.
Our role to support and protect those who work alongside us also extends to our supply chain. We
have a procurement process in place to ensure that our partners and suppliers act with the same
integrity, responsibility and sustainability towards their own employees and suppliers, as we expect of
our ourselves as a business.
Extending our purpose into our communities
Just as we are committed to ‘invest for what matters’ for our clients and employees, this equallyextends to our local communities – supporting them to similarly grow and prosper alongside us. We
focus on projects with a tangible societal impact, across climate change/biodiversity, education andhealth.
AXA IM donates 5% of the fees from a number of our Impact Funds to a number of organisations thatare aligned to our corporate priorities. Within these charities, we are supporting several UN Sustainable
Development Goals.
Our volunteer community ‘AXA Hearts in Action’ also enables our employees to dedicate their time andexpertise to local charities focused on supporting climate-related and other projects with a positive
societal impact. Our calendar of activity runs all year but culminates with a week (AXA Week for Good)for our employees, which is dedicated to increasing awareness, engagement and involvement in climatechange and biodiversity related activities.
We are also committed to the topic of financial education and continue to partner on a number ofschool outreach programmes. Together, our goal is to support school children and young people indeveloping their financial literacy skills and to understand the value of savings.
Finally, we recently announced our partnership with the CFA Institute’s ‘Young Women in Investment
programme’ – designed to support increased gender diversity and female talent in our industry.

▪

Governance

Maintaining a strong, resilient and sustainable business for the long term
We believe that a responsible resilient business is in the optimal position to perform in the long term,
supporting our clients, employees and communities to grow alongside us. As a responsible investor, we
actively use company engagement and voting to positively influence the corporate behaviours neededto drive long term sustainable growth. As a business, we similarly work to nurture a relationship ofaccountability, security, transparency and trust with our clients, employees and all those who engage
and partner with us.
Holding ourselves to the highest standards of behaviour and conduct
Earning and retaining the trust of our clients and stakeholders is key. Our AXA IM Standards framework
details the policies and processes followed by everyone across AXA IM, to ensure that we manage risk
robustly and run our business ethically and transparently for all our stakeholders. The AXA IM standards
are reviewed and each year, to ensure compliance across all teams.
Our code of conduct includes processes on topics such as anti-bribery, whistleblowing and handling of
data, with topics reinforced by regular communication and employee training. Our staff are all required
to undertake regular training to ensure they understand their responsibilities for the security, privacy
and transparency of our organisational operations.
Understanding, assessing and mitigating risks
As a firm with a long-term outlook, we also recognise our responsibility to grow and adapt to newchallenges as they arise, by continually exploring emerging risks and key topics. We operate under aglobal risk management framework, which assesses and addresses all key risks as an investor andbusiness. Cyber security is recognised as a key risk and our staff undertake regular training and checks,
to ensure that everyone understands their own responsibility for the safekeeping and security of any
information and intelligence intrusted to us. We have business recovery plans, which are reviewed andupdated regularly, to ensure that our service to our stakeholders can continue in any unforeseen
scenario.
We finally have processes in place to protect the confidentiality and privacy of all data selected, handledor communicated by us – with adherence to all data laws and regulation.

3- Risk Management
3.1 Mitigation of key Sustainability Risks
AXA Investment Managers uses an approach to sustainability risks that is derived from the integrationof ESG (environment, social and governance) criteria in its research and investment processes. It has
implemented a framework to integrate sustainability risks in investment decisions based onsustainability factors which relies on:•

Sectorial and normative exclusions policies: aim to systematically address the most severe
sustainability risks into the investment decision-making process. For certain alternative asset
classes, exclusion policies are applied to direct investments and covers Controversial
Weapons, Soft Commodities, Ecosystem Protection and Climate Risks. In addition to this first
set of policies which are applied to all our assets under management, ESG integrated funds
and ACT funds apply our ESG Standards. These policies are regularly discussed within our RI
governance, and in particular in our ESG Monitoring & Engagement committee where newpolicies as well as updates of exclusion lists are discussed. The Management Board validates
any new policy, as well as any change in criteria or scope of application. Our sectorial andnormative exclusions policies cover:Set of Policies

Environmental

AXA IM RI Sectorial Policies
Climate (coal mining and coal-based energy
production; oil sands production and oil sandsrelated pipelines; shale and tight oil and gas;
arctic oil and gas)
Biodiversity (ecosystem protection anddeforestation)
Soft commodities (food commodities derivatives)

AXA IM ESG Standards

Human Rights (Controversial Weapons)
Health (Tobacco producers)
Labor, society and human rights (violations ofinternational norms and standards; white
phosphorus weapons producer; exclusion of
investments in securities issued by countries
where serious violations of Human rights areobserved)

SocialGovernance•Business ethics (severe controversies, violationsof international norms and standards)
Corruption (severe controversies, violations ofinternational norms and standards)

ESG scoring methodologies for Corporate, Sovereigns and on Green, Social and Sustainability
bonds: the use of ESG scores in the investment process enables us to focus on assets with an
overall better ESG performance and therefore likely lower sustainability risks. Previously, we
combined data from three providers, but we now strongly rely on a single-provider ESG scoringmodel which is coupled with an instrument-level differentiation and an overlay of AXA IM’s
own analysis. Entitled Q², this new and enhanced qualitative and quantitative approach offers
increased coverage as well as fine-tuned fundamental analysis. We monitor carefullycompanies with the lowest scores as they may represent a risk. Our objective is to consider andaddress most significant ESG risks protecting client returns into the future69.
This framework helps us to ensure we consider how sustainability impacts on the development,
performance or position of a company, as well as having material effects on the financial value in a
broad sense (financial materiality). It also helps us to assess the external impacts of an asset’s activities
on ESG factors (ESG materiality).
This framework is complemented with:
•

•
•

•

In-house ESG research on key themes including Climate Change, Biodiversity, Gender diversity
and Human capital, Cyber security and Data privacy as well as on Health and Nutrition,
supported by broker research as well as regular meetings with companies, participation toconferences and industry events. This research helps us to better understand the materialityof these ESG challenges on sectors, companies and countries.
Internal qualitative ESG and Impact analysis at companies and countries level.
ESG KPIs: Investment teams have access to a wide range of extra-financial data and analysis onenvironmental, social and governance, ‘ESG’ factors, across asset classes. More specifically, a
package of Environmental KPIs is available in the Front Office tool to allow the fullunderstanding and analysis at issuer level.
Stewardship strategy: We adopt an active and impactful approach to stewardship (engagement
and voting) by using our scale as a global investment manager to influence company andmarket practices. In doing so, we strive to reduce investment risk and enhance returns as wellas drive positive impacts for our society and the environment.

2021

impacts of ESG factors on returns

In, we conducted a study on the.
We found that in a volatile year impacted by the global coronavirus pandemic, the AXA IM Exclusion
policies (including RI Sectorial policies and ESG Standards) added 3.71 ppt to the benchmark return70
and did not negatively impact the returns of the opportunity set which has been proxied by the MSCIACWI. Higher-ranked names in terms of ESG outperformed both the universe and the lower ranked
names.
While this analysis cannot be taken as indicative of future performance, it does reinforce our belief
that good ESG scores can be a sign of quality and resilience, and not just during periods of volatility,
as witnessed in 2020, but more broadly overall.
Fundamentally, we believe ESG analysis – and using this analysis in our investment process anddecisions – can potentially lead to more effective investment solutions which not only address global
challenges but also create sustainable value for investors. Ultimately, given where society and theplanet are now, we anticipate that the popularity of ESG investing is only set to soar.
To go into details our this study, please read the research paper Did 2020 deliver a premium for the
top ESG equities? | AXA IM Corporate (axa-im.com)

69 More details available in our study “How responsible investing standards and policies affect returns”
70 This document is for informational purposes only and does not constitute investment research or financial analysis relating

to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment
Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered
as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalizedrecommendation to buy or sell securities. It has been established on the basis of data, projections, forecasts, anticipations andhypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a
specific date. All information in this document is established on data made public by official providers of economic and market
statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on thisdocument. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document.

AXA IM Alts approach to sustainability risks
Sustainability risks in relation to the investments may arise in the social, environmental or governanceareas.
In order to identify and manage these risks, AXA IM Alts uses an integrated approach to Sustainability
risks based on a global set of policies and processes. Such framework is implemented to integrate themost material Sustainability risks in investment decisions based on sustainability factors and relies
notably on the following:••

Sectorial and normative exclusions policies: Alts follows the general approach on policies
mentioned above.
This exclusion policies are complemented with a specific approach with the integration of ESG
factors in the investment decision process. Proprietary methodologies are implemented to
conduct specific Sustainability risk assessments based on ESG factors, notably during theinvestment due diligence phase for a contemplated investment. Depending on the type ofinvestment and strategy, the assessment can be carried out on any or a combination of thefollowing items, without limitation: the underlying asset (including the issuer), the sector, thecounterparty of the trade, the originator, servicer, or manager of underlying portfolio. For
indirect investment, the due diligence covers, among ESG factors, the assessment of the
exclusion policies implemented by the relevant counterparty, originator, servicer, or manager
of underlying portfolio.

AXA IM Alts does not guarantee that the investments are not subject to Sustainability risks to any extent
and there is no assurance that the Sustainability risks assessment will be successful at capturing all
Sustainability risks at any point in time. Investors should be aware that the assessment of the impact of
Sustainability risks on the performance is difficult to predict and is subject to inherent limitations suchas the availability and quality of the data.
If such Sustainability risks materialize in respect of any investment, they may have a negative impact on
the financial performance of the relevant investment.

3.2 Factoring Climate Risk in Real Estate Management
Extreme Weather events costs and Physical Risks
Physical risks are those that are already arising as a result of the rise in temperatures and of the increasein extreme weather events occurrence and magnitude. Potential costs of climate change damages
could equate up to 10% of the global current GDP value in a world at 1.5°c and up to 23% in a world at
3°c, which represent what current countries’ commitments support71. Last IPCC report on the impacts
of a global warming of 1.5°c72 showed that such temperature rise above historical levels would lead tounprecedented impacts for the nature and human beings.
Our work on physical risks is exploratory and can be categorized in three parts:▪

Assessment of Real Assets portfolio exposure to climate risks across AXA Group’s investments
using insurance risk management natural catastrophe models;

71 CRO Forum, 2019
72 See “Global warming of 1.5°C”, IPCC, 2019.

https://www.ipcc.ch/site/assets/uploads/sites/2/2019/06/SR15_Full_Report_High_Res.pdf

▪

AXA IM Real Assets Australia partnering with Deloitte on physical risk assessments of cities inAustralia and Asia;
Assessment of listed assets physical risks exposure using Carbon Delta extreme weather events
costs.

▪

Focus on AXA IM Real Assets: resilience tests on property portfolio
At AXA IM Real Assets, we take a comprehensive approach to considering the physical andtransitional impacts of climate change. Focusing on the physical risks and the resilience of the realestate portfolios, in 2019, AXA IM Real Assets built on current engagement with the NatCat teams
within the AXA Group for a better understanding of physical risk exposure. Utilising these tools, theReal Assets team now has visibility on the level of risk exposure in relation to natural hazards acrossthe global real estate portfolio and CRE Debt portfolios.
With this level of understanding of physical risk exposure at both the asset and portfolio level toflood, earthquake, hail and windstorm, we have begun to identify assets with higher levels ofclimate risk exposure to set in place adaptation plans in order to mitigate risk from a physicalperspective. The risk level identified is driven by three components: the hazard (defined by severity
and frequency), the exposure (characterized by the building’s physical properties) and thevulnerability (defined by destruction rates, function of the hazard and the exposure).
We also monitor the international and local transitional regulatory landscapes to anticipate market
legislations that will influence the liquidity of assets and act upon such notions in order to avoid therisk of stranded assets.
In 2020, by formally integrating this analysis within AXA group tools into the investment process forreal estate and CRE debt, we intend to not only understand risk based on historical events, but tobetter understand future risk associated with climate change for a clearer view on the climate valueat-risk of the portfolio.

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 realestate, which are subject to both physical and transition risks in TCFD terminology.
In 2021, AXA IM Alts Real Estate teams worked in collaboration with AXA, focusing on their investments,
on Climate Risks in Real Estate management.
•

Physical Risk – Clymene Analysis

Since its first Climate Report (2016), AXA conducted an analysis on a selection of property assets. In
2021, this analysis covers a scope of more than €43 billion73 of direct property investments. AXA’s
Investment and Risk Management teams evaluated the financial impact of floods, windstorms and hailon these properties in a selection of 20 countries representing close to 90% of the portfolio.
Consistent with previous studies using the Clymene platform, both average annual losses and losses
generated by one in a 50 years flood, windstorm and hail events remain limited compared to the total
asset value. Results of the assessment based on the average annual loss are detailed on a country-levelin the figures below.

73 Representing AXA’s ownership in real estate assets managed by AXA IM Alts as at 31/12/2021

FIGURE 1: AXA’S REAL ESTATE PORTFOLIO SPLIT BY COUNTRY ON THE LEFT PANEL , CONTRIBUTION OF W IND,FLOOD AND HAIL PERILS TO THE ANNUAL AVERAGE LOSS
Source: AXA, AXA IM, 2021.

FIGURE 2: FLOOD AAL ( LEFT) AND W INDSTORM AAL ( MIDDLE) AND HAIL (RIGHT) SPLIT BY COUNTRY
Source: AXA, AXA IM, 2021.

Natural hazard risk is driven by three components:
1. The hazard, defined by its severity and frequency,
2. the exposure, characterized by the building’s physical properties, and3. the vulnerability, defined by destruction rates and function of the hazard and the exposure.
AXA’s real estate exposure is global with most of the portfolio located in Europe (82%). The portfolio’s
highest risk exposure is to flood (63% of AAL), followed by windstorm and hail, as shown in Erreur !
Source du renvoi introuvable.. Currently, asset-level data utilised to run the analysis relies on thegeolocation of buildings as well as their main occupancy. However, models used to assess the risk
exposure to natural hazards have the potential to integrate a more granular level of information in
relation to physical components of a building, such as the structure, the year of construction, the heightof the building, etc, which can contribute to more refined and asset specific results in the analysis. Suchdetailed information is currently not systematically available in real estate portfolios but there is on-

going work to collect this data more systematically in order to increase the precision of the output
result.
Based on the internal risk assessment, the United States drive the AAL for both flood (62%) and hail
(33%) perils. For windstorm peril, the US, France, the UK, Japan and Germany contribute 62% of theannual average loss. For flood peril, Germany and Switzerland contribute 30% of the AAL. For hail peril,France, Australia, Switzerland and Germany contribute 59% of the AAL.
Upon analysing the Clymene results, the AAL has increased compared to the analysis in 2021 due to theaddition of new assets.

•

Physical Risk – Integrating Physical Risk Analyses in the Investment Decision

Through the use of internal AXA tools such as the underwriting Aegis tool and the Clymene platform,
AXA’s investment team has been able to identify buildings with higher levels of historical physical risk,
addressed by the asset management teams tasked to develop subsequent adaptation responses as aresult. Some projects were undertaken in 2020 to obtain a proof of concept and advance to a portfolio
wide analysis of future scenarios, including models from MSCI Carbon Delta and AXA Climate.
For a pan-european real estate portfolio, MSCI Carbon Delta modelled resilience to transitional andphysical risks in relation to climate change, a holistic approach that enabled the investment team to
identify the value-at-risk of assets in the fund and the tail-risk buildings which need additional attention
to develop a subsequent adaptation strategy.
As another proof of concept, our investment teams engaged with AXA Climate to focus on physical risk
using RCP 4.5 and 8.5 scenarios, to capture the normalized risk score of a representative global portfolioof 90 assets, with a deep dive into 3 assets for which they developed a detailed adaptation report toguide the asset management teams. These pilot tests enable the team to better understand the market
of climate risk service providers and to develop a strategy to increase the resilience of AXA’s real estate
assets.
In addition, AXA IM Real Assets is increasingly utilising the Aegis underwriting tool to strengthen theanalysis of physical resilience in relation to climate change during the acquisition process. The
responsible investment team supports local acquisition teams by underwriting a climate physical risk
analysis of the buildings in question and incorporating the results in the technical due diligence phase.
This has enabled acquisition teams to engage with their technical partners to reinforce their climaterelated ambitions and include a specific adaptation strategy for those assets where required.
In conclusion, according to in-house risk modelling, the financial impacts of climate-related “physicalrisks” on real estate assets is currently limited. The teams at AXA IM Real Assets continue to collaborate
with the AXA Group Natural Catastrophe (Nat Cat) teams to better understand physical risk levels anddetermine appropriate adaptation efforts to limit such exposures to climatic event.
In addition to the physical risks of climate change our teams increasingly consider the risks of transition
to a low carbon economy, with specific consideration of liquidity and regulatory risk.

•

Transition Risk – A Holistic Approach to Resilience

Physical risks are not the only Climate-related risks considered by financial institutions. Risks related tothe transition to a low-carbon economy allow financial institutions to increase their resilience to new
regulatory frameworks introduced in order to mitigate further financial or performance related risks.

Among these efforts to identify and mitigate transitional risks, AXA’s investment teams have relied on
different market-standard tools, such as the Energy Performance Certificate (EU EPC) and the Carbon
Risk Real Estate Monitor (CRREM) model.
Aligned with the EU Taxonomy on Sustainable Finance and with the MEES (Minimum Energy Efficiency
Standard) regulation in the UK, the EU EPC is becoming a useful tool to determine the stock of buildingson which to concentrate the efforts to improve energy efficiency and thus reduce the carbon footprint.
In addition to an EU EPC being required in order to sell or trade an asset, our conviction is that thisregulatory standard will continue to be used to define minimum energy performance standards, as it iscurrently in the UK and Netherlands. This is now used as internal guidance by AXA’s investment teams
in order to limit the transitional liquidity risk of its buildings, with the goal to have at least 75% of its
European portfolio with an EPC of C or better by 2025, from 45% as at 2021.
The CRREM model is another tool available to benchmark buildings’ energy performance against Paris
Agreement targets. Importantly this tool provides science based intensity targets for different building
types, in different countries, which provide, for the first time, consistent asset level performance targets
in both kWh and GHG emissions which need to be met in order for the underlying asset to align with
global targets. This tool more accurately reflects the complex reality of delivering a meaningful roadmap
towards net carbon neutrality.
This tool provides critical insight into measuring the performance of the delivery of our ambition todeliver net zero investment portfolios by 2050 or before. An ambition which AXA has made clear with
its participation in both the Net Zero Asset Owner Alliance and the Net Zero Asset Managers Initiative.
As at 2021, 25% of AXA’s building stock is aligned with the 1.5°C warming scenario, a percentage thatis set to increase with the new decarbonization targets set by the organisation.

3.3 Internal Controls

The ESG and Climate topics are covered by AXA IM’s control framework, with responsibilities spread
between the first level of controls performed by the business and second level of controls performed
by dedicated teams.
ESG-related investment guidelines consist of our exclusion policies, as well as of eligibility criteria andrules specific to funds which have been awarded sustainability-related labels. They are monitored by:

•
•
•
•

The portfolio management teams;
A dedicated Investment Guidelines team with independent and systematic pre and posttrade controls;
The Compliance department with ad hoc controls on the work performed by theInvestment Guidelines team;
The Audit department which performs periodic controls.

Regularly, through the integration of a wide range of ESG KPIs into our Front Office tools, investment
teams are able to analyze and monitor each individual holding and the portfolio positioning on ESG
factors and ESG related metrics.
Pre-trade controls are performed by the business teams themselves. The COO ensures that fundmanagers divest all investments in restricted companies and do not invest in restricted companies aslong as there are restricted or absent new instruction.
Our Investment Guidelines team (“IG”) is monitoring the correct application of the exclusion list withpre-trade and post-trade monitoring systems. Following the update of the eligible universe, theportfolio manager divests from stocks taking into account both a client’s as well as fund’s best interest.
These ban lists are integrated into our Front Office tools.
The Compliance and Risk Management teams are part of the RI governance committees. They oversee
the adherence to regulatory requirements and management of risks related to these topics, throughcontrol plans which covers RI-related processes. At AXA IM, the Compliance department is in charge ofmonitoring regulatory changes and works closely with investment teams as well as responsible
investment professionals and Risk Management department.
Moreover, as part of the sustainability-related regulatory changes, AXA IM has launched several
working groups that are in charge to monitor regulatory changes related to responsible investment, todefine our position, set up action plans and to adapt our commercial offer. In addition, we participate
and share our views with industry bodies such as the EFAMA and regulators.

4- Metrics
We show in this section the ESG, Climate and Biodiversity footprint of AXA IM investments and provide
details on methodologies used mostly for reporting purpose.

4.1 ESG Dashboard•

2021 ESG Footprint Dashboard on listed assets

We produce on an annual basis an ESG Dashboard at AXA IM level aiming to summarize asset classes’contributions to the global ESG score. The dashboard below is based on AXA IM worldwide holdings’
but specifically focuses on mainstream asset classes – equities, sovereign bonds and corporate bonds– at the end of year 202174.
As mentioned above in the section 2 – Strategy, in November 2021, AXA IM moved from a “blended
score” to a structured score called Q². Figures in the table below for the 2020 are calculated throughprevious AXA IM proprietary scoring methodology while 2021 figures are built on Q² methodology. In
addition, we refined the ESG Score calculation perimeter in 2021, compared to 2020. It is based on all
eligible assets managed by AXA Investment Managers (i.e. direct corporates and sovereigns), excluding
assets delegated to external entity and joint ventures. 2020 and 2021 results are therefore notcomparable.

Methodology

AUM

coverage

ScoresScore ESG Score E Score S Score G[0-10][0-10][in M€][%]AXA IM Proprietary ESG
Scoring

5,90

6,10

5,20

6,00

535 968 €

95%

2021

Q²

5,97

5,78

6,37

6,07

479 491 €

94%

2020

AXA IM Proprietary ESG
Scoring

6,20

6,20

5,50

5,50

81 415 €

93%

2021

Q²

5,55

6,69

5,43

5,38

87 153 €

95%

2020

AXA IM Proprietary ESG
Scoring

6,10

6,60

5,70

5,20

213 169 € 95%

2021

Q²

5,43

6,88

5,15

5,25

186 862 € 89%

2020

AXA IM Proprietary ESG
Scoring

5,80

5,60

4,70

5,80

227 899 € 99%

2021

Q²

6,57

4,54

7,74

7,01

205 476 € 100%

Equities

SovereignBonds[0-10]

2020
AXA IM

Corporate
Bonds[0-10]

74 Worldwide holdings include the assets managed by AXA IM Paris.

2020
Benchmarks
2021--- MSCIWorld ACWI

2020--- BofAML
GlobalAggregate
Corporate

2020--- JPM GBI
Global

2020

2021

2021

2021

Q²

5,64

6,10

5,98

5,51

98%

Q²

5,13

6,50

5,06

4,83

100%

Q²

5,16

6,85

4,87

4,97

95%

Q²

6,60

5,00

7,97

6,72

100%

2020 to 2021
If we compare to last year’s dashboard, despite a change in ESG Scoring methodology, the overall
general feeling is positive with stability of ESG Score coverage. The ESG Rating coverage on listed assets
is now at 94%. ESG Scores of corporates remains above the benchmark, for equities and bonds.
Due to methodological changes, we nevertheless note a significant change, between 2020 and 2021,of the S score of Sovereign bonds. MSCI methodology on Sovereigns is more granular on Assimilated
Sovereigns meaning that they now have their own ESG Score (e.g., whereas with the previous scoring
methodology regions inherited the score of their sovereign parent, they now have their own score).
Furthermore, MSCI combines two types of scores: a management score and an exposure score while
the previous AXA IM scoring methodology classified countries in two groups depending on their levelof development and for which the aggregation method for raw data was different. Finally, early 2021,
we deployed the qualitative assessment bonus system to social and sustainability bonds, which had apositive impact on sovereign S scores if qualitative analyst had not expressed a negative view.

•2021 ESG Footprint Dashboard on alternative assets

In 2015, AXA IM Alts has developed ESG Scoring methodologies for alternative asset classes has
described above. The table below shows the results of the implementation of these methodologies.
2021

E

S

G

ESG

CoverageAUM[0-10][0-10][0-10][0-10][%][in M€]

Alternatives

5,39

5,78

6,35

5,60

87%

134 180 €Structured Finance

4,84

5,17

6,10

5,21

81%

53 501 €Real Assets

5,72

6,13

6,50

5,83

90%

80 679 €Real Estate

5,11

6,37

6,47

5,64

94%

57 920 €CRE Debt

6,19

5,43

6,27

6,08

63%

10 670 €Infrastructure

9,22

7,3

9,15

8,63

100%

2 839 €

Debt – Infrastructure

7,9

4,9

6

5,9

100%

9 250 €The ESG rating for Direct Real Estate significantly evolved during the 2020 -2021 period, five years after
its initial inception. Reflecting the rapid change in the market, the refinement of the rating tool wasundertaken to ensure closer alignment with new and evolving regulations, and to directly incorporate
new and emerging risk indicators, such as climate impacts and biodiversity considerations. While manyof these aspects have been considered as part of investment decisions over the past years, they had
not formally been integrated into the rating tool.
As a result of change in granularity of data and an increasing breadth of data, scores are largely
incomparable across the period.
Similar work is underway for all Real Assets sectors including real estate debt and infrastructure.

4.2 Environmental dashboard•

Our remaining Coal exposure

Our exposure to coal mining activities has been decreasing regularly since 2018 both in absoluteamount invested and in share of total investments, following the implementation of our climate risks
exclusion policy and its regular reinforcements. We also monitor coal capex plans and therefore, theamounts invested in growing coal companies have been decreasing as well.
In the chart below, we note the impact of 2019 Climate Risks policy reinforcements, as the applicationof our Climate Risks policy has been extended to all our assets under management which resulted in adecrease of our investments in companies having coal mining revenues.
These results are in line with our objectives and our overall climate strategy to progressively reduce our
exposure to coal and to exit all coal investments in OECD countries by the end of this decade, andthroughout the rest of the world by 2040. This progress is the result of strengthening our exclusion
criteria and of our efforts, through engagement and voting, to encourage companies to implementtransition strategies. This consistency between our commitments in the fight against climate change
and our investment practices allow AXA IM to be ranked first in the Reclaim Finance’s Asset Managers
Climate scorecard75 for the second consecutive year.
Investments in companies with coal CapEx and/or coal revenues [€]1 200 000 000
1 000 000 000
800 000 000
600 000 000
400 000 000
200 000 000
0Coal CapEx[Mn€]

Coal CapEx[Mn€]

Coal CapEx[Mn€]

Coal Revenues Coal Revenues Coal Revenues
[Mn€]
[Mn€]
[Mn€]

2019

2020

2021

historicalwith 2021 added coverage

2019

2020

2021

Sources: AXA IM, Urgewald, Trucost-S&P, as of 31/12/2021.

75 See “The Asset Managers fueling climate chaos”, Reclaim Finance, 2022. Asset_Manager_Climate_Scorecard_2022.pdf(reclaimfinance.org)

Share of investments in companies with coal CapEx and/or coal
revenues
0,25%
0,20%
0,15%
0,10%
0,05%
0,00%
Coal CapEx [%] Coal CapEx [%] Coal CapEx [%] Coal Revenues Coal Revenues Coal Revenues
[%]
[%]
[%]
2019

2020

2021

historical

2019

2020

2021

with 2021 added coverage

Sources: AXA IM, Urgewald, Trucost-S&P, as of 31/12/2021.

AXA IM calculates its coal exposure using S&P Trucost and Urgewald GCEL databases. AXA IM chose to
keep the most conservative approach by not setting any threshold for considering an asset as coal
exposed. Therefore, if a company has 1$ revenue or CapEx in coal activities, AXA IM accounts for all(100%) investments in this company for calculating its global coal exposure. We also restated our coal
exposure for 2019 and 2020 to include newly added coverage and therefore perform a consistentcomparison year-over-year.
As a result, this approach does not measure or report on company improvements, but it does reporton the evolution of the impacts of AXA IM's investment choices. The calculation of exposure to fossil
fuels, non-conventional oil and gas and coal is based on all assets managed by AXA Investment
Managers, excluding assets delegated to an external entity and joint ventures.
Company

Engie

Enel

NextEraEnergySectorElectric utilities

Coal exposure – No
mining, only power
generation
Coal capacity : 2.1GW77,
3% of total capacity
1% of revenues76

Electric utilities

Coal capacity : 6.9GW78,
8% of total capacity

Electric utilities

Coal capacity : 1.3GW79,
3% of total capacity

2.5% of revenues76

1% of revenues76

Rational / Company’s commitments
Engie committed in May 2021 to exit coal generation
by 2025 in Europe and by 2027 for the rest of theworld. For its 10 existing coal power plants, the groupintends to close 4 of them and convert 4 others, while
selling is seen as a last resort option (considered for 2
as of May 2021)77
Enel accelerated in 2021 its commitment to phase out
coal by 2027 (vs 2030 targeted as previously
announced in 2020). The intention is to close someplants and to convert others to natural gas.78
NextEra has already closed its coal plants in Florida
and will retire the others elsewhere in the US by
202879Disclaimer: this analysis and figures in relation to issuers are past and are based on public information provided forillustrative purpose only and do not constitute a recommendation.

76 Sustainalytics data as of 2021
77 “Putting strategy into action”, May 2021, Engie
78 Executive Summary Capital Markets Day 2021 | Enel Group79 Investor Conference 2022, NextEra Energy•

Our remaining exposure on Fossil Fuels

As mentioned above, at the COP26, AXA IM announced the extension of its existing Climate Risks policy
to Oil & Gas. This new policy has been implemented in February 2022, therefore, AXA IM’s fossil fuels
and unconventional oil & gas figures does not take into account the impacts of the implementation of
the Climate Risks policy new criteria. As of 31/12/2021, AXA Investment Managers invests c.€4 billion
in fossil fuels, representing 1,37% of the assets under management. 0,79% of AXA IM’s assets undermanagement are invested in unconventional fossil fuels, representing c.€3 billion.
To calculate the exposition, we rely on the Urgewald GOGEL database. AXA IM chose to keep the mostconservative approach by not setting any threshold for considering an asset as fossil fuels or
unconventional fossil fuels exposed. Therefore, if a company has 1$ revenue in fossil fuels or
unconventional fossil fuels, AXA IM accounts for all investments in this company for calculating its fossil
fuels exposure and unconventional oil & gas exposure. As a result, this approach does not measure or
report on company improvements, but it does report on the evolution of the impacts of AXA IM's
investment choices. The calculation of exposure to fossil fuels, non-conventional oil and gas and coal isbased on all assets managed by AXA Investment Managers, excluding assets delegated to an external
entity and joint ventures.

4.3 Scenario analysis: Global warming scenarios or possible climate futures
On August 9, 2021, the IPCC released the first instalment of its Sixth Assessment Report on the physicalscience basis of climate change. One statement is stark and clear: “It is unequivocal that human
influence has warmed the atmosphere, ocean and land80. The report precises that the best estimate
for of human-induced warming is 1.07°C above pre-industrial levels, with greater warming on land thanin the oceans. The IPCC also adds that “global surface temperature will continue to increase until atleast mid-century” and that “global warming of 1.5°C and 2°C will be exceeded during the 21st century
unless deep reductions in CO₂ and the other greenhouse gas emissions occur in the coming decades”.
To maintain the increase in temperature to below 2°C, the world’s emissions need to decline at a rapid
pace and attain net zero between 2050 and 2070. Achieving Carbon neutrality or “net zero” emissions
requires to strike a balance between anthropogenic emissions by sources and removals by sinks. To
reach this stage, the world will have phased out most CO2 emissions and will be employing methods
that capture and store the remaining low levels of emissions (“offsetting”) as well as the CO2 in theatmosphere from the build-up of historical emissions. Green technologies are instrumental in achieving
this decarbonization pathway.
The Paris Agreement binds parties to limit warming well below 2°C compared to pre-industrial levels by
2100. Most of the current Intended National Determined Contributions (“NDCs”) have 2020 to 2030 astheir stated compliance period. NDCs expressed to 2050 are scaled back to 2030 in our modelling. The
2021 UNEP Gap Report, published ahead of the COP26 held in Glasgow in November 2021, estimatesthat implementing the updated unconditional NDCs would lead to a mean global temperature ofaround 2.7°C. If emissions continue to rise as they have in the past, the IPCC expects temperatures toincrease by at least 3°C by 2010, and possibly by more than 4°C.
The TCFD recommendations specifically state that organizations consider a set of scenarios, including
a “2°C or lower” scenario, in reference to the 2015 Paris Agreement since they will have different
implications on investments.
80 IPCC 6th Assessment ReportWhile countries need to raise the bar of their current carbon pledges, the IPCC 1.5°c report publishedin 2018 also highlighted nations would have to target a 1.5°c scenario rather than a 2°c scenario to
avoid unprecedent damages for biodiversity, human beings and the economy81. This requires reducing
carbon emissions by 45% by 2030 compared to 2010 levels and achieving carbon neutrality by 2050.

Gap between Paris agreement country pledges, 2° and 1.5°c scenarios

Sources: UNEP Emissions Gap Report 2021, AXA IM.

•

Climate scenario, test for the sensitivity of business models to various warming trajectories

A climate scenario is a forecast of the future based on projecting several variables. These variables
include greenhouse gas emissions, cost and assimilation of technology, economic growth,demographics, development and use of CCS (Carbon Capture & Storage). They could lead to certain
predicted outcomes such as how much temperatures will rise and what this level of global warming will
result in for the environment, society and the economy.
Most “below 2°C” scenarios are based on a rapid and radical shift in the energy supply and demand
picture. On the supply side, scenarios are based on a decrease in fossil fuels, with coal and oil being
squeezed out while gas remains in use. Renewable energy sources such as wind, solar and biomass,
increase significantly, and nuclear remains a part of the future energy mix.
In well-known scenarios such as the International Energy Agency (IEA) ones, efforts to limit greenhousegas emissions are derived mainly from technical and technological energy efficiency measures. Whilethey say little on social conditions, relative costs and technological developments to achieve such

81 This was reiterated in the report “Climate Change 2022: Impacts, Adaptation and Vulnerability” published in February

2022 by the IPCC

energy mix shift, IEAs scenarios are well recognized and widely used especially by companies in most
sectors at stake with a strong climate impact.
The IEA broke new ground by releasing its Net Zero by 2050 scenario in May 2021. This report presentsa path to reduce to net zero emissions from the energy sector while limiting the increase in temperature
to 1.5°C. This scenario has been integrated in the IEA’s latest World Energy Outlook. The IEA reaches
conclusions very similar to the ones the IPCC reached in its 2018 1.5°C report, with a required reductionof CO₂ emissions from energy and industrial processes of nearly 40% between 2020 and 2030. In
addition, the IEA calls for a 75% reduction in methane emissions from fossil fuel use over the same timeframe. The IEA is very precise and highlights the different pathways for advanced and emerging
economies, the investments needed, and the overall necessity of global coordination and social
acceptance.

IEA Climate scenarios: CO2 emissions from the Energy sector and industrial processes

STEPS: Stated Policy Scenario; APS: Announced Pledged Scenario; SDS: Sustainable Development
Scenario; NZE: Net Zero Emissions by 2050 Scenario
Source: IEA World Energy Outlook, 2021.

4.4 Climate scenario, test for the sensitivity of business models to various
warming trajectories
AXA IM relies on three Integrated Assessment Models (AIM/CGE) for investment-related analysis: AIM
CGE Advance (1.5°C scenario), AIM CGE Advance Late Action (2°C scenario) and AIM CGE Advance (3°C
scenario). This AIM/CGE model has been developed by the Japanese National Institute forEnvironmental Studies which features detailed data regarding technology factors, a key component of
Carbon Delta’s work. These are close to the International Panel on Climate Change (IPCC) “Shared SocioEconomic Pathways» (SSPs) scenarios.
IAMs models provide a framework for understanding the climate change problem and for informing
judgments about the relative value of options for dealing with climate change. The links between thevarious climate and non-climate modules that are inherently built into complex IAMs allow them to
explore cascading effects, how decisions in one area of the economy affect all the other areas. This
allows, for example, to see how population and GDP growth could impact the demand for electricity

and how that demand could be met in an optimal way by either maximizing the social impact or byminimizing costs to meet the new demand.
To run its scenario analysis, AXA IM focused on two warming IAMs scenarios and tested their respective
impacts in terms of value of investments:•••

The 3°C scenario (AIM/CGE 3°c)
The 2°c scenario (AIM/CGE 2°c)
The 1.5°c scenario (AIM/CGE 1.5°c)

A narrative behind each of these scenarios is formed. It includes indicators on population, economic
growth, low carbon technology use, energy system information, land cover, etc. These indicators arehence used in the IAMs scenarios and modify the outputs of these models. Below we present some of
the indicators that enter the IAMs scenarios and their future trends from now to the end of the century▪

Demographics

The three IAMs scenarios used in the VaR calculations project population levels under the UN medianprojection, with a deviation starting between 2030 and 2040. The bulk of the scenarios project astabilization of the population growth around the middle of the century.
Most of the scenarios project a world population at the end of the century of about 9 billion against
more than 10 billion as of UN median projections.
▪

GDP Growth

For the first decade, the three scenarios project about the same GDP growth with a divergence starting
around 2030. All the scenarios are forecasted to grow at a constant yet lesser rate during the sametime period.
Most of the scenarios project less growth and lower end of century GDP levels than the OECD GDP
forecast for the world.
▪

Energy Mix

All scenarios project a major increase in installed renewable capacity by 2050.
Forecasted Energy Installed Capacity by 2050 in climate scenarios used for AXA IM Climate Valueat Risk calculations

Sources: Carbon Delta, AXA IM, 2020

▪

Future Green House Gas emissions82

The AIM 1.5°c and 2°c scenarios project a peak in emissions in 2020 and then a sharp decrease
between 2020 and 2050. The 2°c scenario then levels off between 2050 and 2060 with close to zero
emissions by 2100. The 1.5°c scenario projects a continuous decarbonization and becomes emission
neutral around 2055 and goes further negative until the end of the century.
The AIM 3°c scenario, which is not considered ambitious enough, projects an emission peak in 2020
and is followed by a slow but constant decrease of emissions until the end of the century.
Forecasted Green House Gas emissions by 2100 in climate scenarios used for AXA IM Climate Value at
Risk calculations

Source: Carbon Delta, 2020.

4.5 Forward-Looking metrics and climate-related impacts for the businessOver the past few years, the financial industry has made further progress in illustrating materiality ofclimate change and measuring alignment of investments. Recently, some emblematic initiatives havecome up with concrete frameworks. These included the publication of the Paris Aligned Investment
Initiative Net Zero Investment Framework 83 , the United Nations convened Net-Zero Asset Owner
Alliance and the Science Based Targets initiative (SBTi)’s framework for financial institutions.
Investors are now turning towards new types of analyses and corresponding metrics which present a
more insightful response into what it means to be a “Paris-aligned” investor.
In that context, AXA IM has explored forward-looking metrics over the past years. In 2021, and throughits collaboration with MSCI and Beyond Ratings, AXA IM has continued to investigate innovative
forward-looking metrics to measure exposure of investments to transition and physical risks.

82 These emissions are net emissions (sequestered emissions are considered) and include the following gases: carbon dioxide(CO2), methane (CH4) and nitrous oxide (N2O). The CH4 and N2O emissions were converted into CO2 equivalent (eq) numbers
using the IPCC AR5 global warming potentials (GWP) relative to CO2. These gases account for most global emissions (around
80% of the emissions) and are the main drivers of global warming.
83 See “Net Zero Investment Framework 1.5°C Implementation Guide”, Paris Aligned Investment, 2021.
https://www.parisalignedinvestment.org/media/2021/03/PAII-Net-Zero-Investment-Framework_Implementation-Guide.pdf

▪

”Warming Potential” methodologies

AXA IM has been working on the concept of investments’ temperature or “warming potential” withMSCI (Corporate investments) and Beyond Ratings (Sovereign investments) since 2018. The“temperature” concept provides a measure of the gap between future carbon pledges and sciencebased emissions budget still available before global warming increases.
This is a powerful tool that can provide an overall assessment of how companies and issuers cancontribute to the convergence to a low sustainable carbon world. Climate model providers offer data
and methodologies by which investors can calculate company or portfolio-level temperatures which
can be compared to the 1.5°c target. Such a temperature is also a good way to incentivise dialogue andaction by all agents involved such as companies and investors.
It relies on a top-down approach by combining country-level, sector-agnostic and sector-specificwarming potential functions (translating tons of GHG emissions into potential global warming) withcompany-specific decarbonation capacities and targets. Notably, this model relies on:
•
•
•
•
•

Country-level projecting carbon intensities to 2030 which corresponds to the horizon of the
Nationally Determined Contributions (NDCs) presented to the COP26;
Gaps between NDCs and carbon emissions budget associated to various temperature scenarios(according to the UNEP Gap report);
Company-level business mix structures by sectors and countries ;Company-level current carbon intensities;
R&D in green technologies/products highlighting “transition” opportunities.

From our last climate report, the MSCI Warming Potential model have known slightly updates mainly
due to integrating latest scientific knowledges and up-to-date remaining 2°C carbon budget.
As the number of signatories to "net zero" initiatives increases, Implied temperature rise models (“ITR”)
are gaining traction as the need to monitor the portfolio performance against these commitments,
several new methodologies have come to the market. Therefore, MSCI is currently developing andprogressively replacing the Warming Potential metric with an Implied Temperature Rise model which
is more aligned with TCFD recommendations.
The ITR considers the remaining carbon budget left for the world if the global warming by 2100 is to be
kept well below 2°C and by extension, how much a company can emit (across Scopes 1, 2 and 3) and
can remain within the limitations.
The ITR of a specific company is computed in 4 steps:
1. Allocate a carbon budget to the company:
The budget at global level is derived from IPCC scenario and is attributed to a specific company
based on its sector and country revenues mix.
2. Compute projected company emissions:
Considering the company current reported or estimated GHG emissions and the targets set to
reduce its emissions, the timeseries of the projected absolute emissions until 2070 are generated
for Scopes 1, 2 and 3.
3. Calculate the company over/undershoot of its carbon budget:
The carbon budget over/undershoot is the difference between the company projected emissions
and its allocated 2°C carbon budget. Then, the relative under/overshoot of companies arecomputed by dividing their under/overshoot with their respective 2°C carbon budget.
A company projected to emit carbon below budget can be said to “undershoot” the budget; acompany projected to exceed the budget “overshoots” it.

4. Convert the relative over/undershoot to a degree of temperature rise:
The Transient Climate Response to Cumulative Emissions (TCRE) factor allows to apply a linear formula
to convert over/undershoot into degrees of temperature rise.
Temperature Rise = 2°C + company level relative over/undershoot × Global 2°C Budget × TCRE Factor
The TCRE was established by the IPCC and provides a relationship that links each additional unit ofemissions emitted beyond the available remaining global 2°C carbon budget to degrees of additional
warming. The TCRE factor is set at 0.000545°C warming per Gt CO2.

Source: MSCI ESG Research, 2021.

At portfolio level, the sum of finance budget overshoot is compared to finance carbon budgets for the
portfolio holdings. Using the TCRE factor, the total overshoot is converted to a degree of temperaturerise.
The Implied Temperature Rise metric estimates the global implied temperature rise (in the year 2100
or later) if the whole economy had the same carbon budget over-/undershoot level as the company (orportfolio) in question.

▪

Sovereign Investments’ temperature

AXA IM leverages the CLAIM model developed by Beyond Ratings to assess the temperature of AXA
IM’s investment portfolios on sovereign assets. Both this model and the MSCI Warming Potential (forcorporates) detailed above rely on a similar approach. This model uses the national carbon pledges
made by Governments towards the Paris Agreement’s “carbon budget” to express theoreticaltemperature of sovereign assets. Beyond Ratings has developed this approach inferring 2°C compliant
national carbon budgets by relying on the so-called “Kaya relationship” between GHGH emissions, GDP
growth, demography, energy efficiency and carbon intensity.
The Kaya equation
National Determined Contributions (NDCs) that have been expressed in the Paris Agreement andupdated during the COP26 are used to build a homogeneous allocation of GHG emissions reduction
commitments by countries by 2030. Using theoretical linear relationship between carbon emissions
and temperature rise, Beyond Ratings translate national carbon commitment intensities by 2030 into
theorical temperature rise.
During the COP26, NDCs have been released and updated by the participants (112 updated NDCs
including: Australia, Japan, United States, France, Germany, China…). This model assesses sovereigntemperatures by considering these new commitments. The following map shows the temperaturesassociated with the current countries’ NDCs.
Diagram: Temperature of NDCs

Source: Beyond Ratings, 2021.

▪

Quantifying Climate risks: Climate Value at Risk model (Climate VaR)

Besides the “Warming Potential” approach, which embodies the impact that our investments may haveon the climate, climate risk analysis can also be undertaken from a business/investment risk perspective
to assess how climate change may impact investment returns.
Here as well, AXA IM leverages a Climate Value-at-Risk (Climate VaR) model developed by MSCI. Thismodel represents an estimation of how the value of AXA IM’s investment portfolios – on corporate
bonds and listed equities - could be impacted (up or down) by climate policy risk, technology transition
opportunities and extreme weather events on a 15-year time horizon. This model is currently applicable
only to corporate assets (not to sovereign assets) and it is in continuous development. Yearly updates
on this model allow us to expand the range of measured climate-related financial risks of AXA IM’s
investments and to assess them more precisely.
Policy Risk Climate VaR (transition costs)
The transition to a low-carbon economy through market and regulations changes may significantly
negatively impact businesses and their investors. Policy Risk Climate VaR metric assesses how
regulations stemming from countries’ Nationally Determined Contributions (NDCs) affect a company
whose activities are directly (Scope 1) and indirectly (Scope 2 and Scope 3) producing greenhouse gases(GHG).
Therefore, this metric evaluates the potential economic losses for companies if they fail to adapt theiractivities accordingly to a given climate scenario (1.5°C, 2°C or 3°C scenario) and derived transition
pathways.
The scenario used by MSCI for the estimation are provided by three Integrated Assessment Models(AIM/CGE) for investment-related analysis; AIM CGE Advance (1.5°C scenario), AIM CGE Advance Late
Action (2°C scenario) and AIM CGE Advance (3°C scenario). This AIM/CGE model has been developed

by the Japanese National Institute for Environmental Studies which features detailed data regarding
technology factors, a key component of Carbon Delta’s work. These are close to the International Panelon Climate Change (IPCC) “Shared Socio-Economic Pathways» (SSPs) scenarios.
From last year, MSCI has recently modified the scenarios by integrating REMIND NGFS prices and costmodelling.
Technology Opportunity Climate VaR (green opportunities)
The transition to a low-carbon economy may also lead to new opportunities for businesses and theirinvestors especially through the development of green technologies. Technology Opportunity Climate
VaR metric assesses the future potential revenues of companies coming from these green
opportunities. While it is certainly not the only factors to be considered to estimate future green
revenues, this analysis notably relies on companies’ green patents and current low-carbon revenues.
Therefore, this metric evaluates the potential economic revenues for companies taking the rightdecarbonation path accordingly to a given climate scenario (1.5°C, 2°C or 3°C scenario) and derived
transition pathways.
Physical Risk Climate VaR
Physical climate risk scenarios define possible climatic consequences resulting from increased levels of
GHG emissions, and the ensuing financial burden (or opportunity) borne by businesses and theirinvestors. Physical Risk Climate VaR metric assesses how much companies are exposed (notably via
their geographical location, the size and value of their assets, …) and vulnerable (notably via theircapacity to adapt) to increasingly frequent and severe extreme weather events. Using physical climate
scenarios and projections, MSCI developed a Physical Risk Climate analysis up to 2100 combining▪

▪

Chronic climate risks referring to long-term shifts in climate patterns (extreme heat, extreme
cold, heavy precipitation, heavy snowfall, wind gust). These risks are based on statisticalextrapolation of a historical dataset and projections into the future.
Acute climate risks - which refer to event-driven physical risks (coastal flooding, fluvial flooding,tropical cyclones, river low flow and wildfire). The use of scenario is an important componentof climate risk analysis, especially for extreme weather modelling. The Relative Concentration
Pathways (RCP) scenarios prescribe specific trajectories of future greenhouse gas emissions
and diverge slowly over time generating quite similar climate projections. MSCI uses mainly
RCP 8.5 scenario and a combination of short-term projections of historical climate data.

Therefore, this metric evaluates the potential economic losses for companies in a changing climate
environment accordingly to a given climate scenario, average and aggressive physical scenarios. The
average scenario represents the most likely Physical Risk Climate costs to occur, meaning between
1.5°C and 2°C scenario. While the aggressive scenario embodies the tailor risk of the physical risk cost
distribution (95% percentile scenario), meaning over 2°C.
From 2021, the MSCI Climate VaR model have known several updates. Main changes are related tophysical risks assessment as two acute risks have been added to the MSCI model: river low flow andwildfire. This addition enables this model to better assess economic impacts of respectively water
scarcity on the power production sector (especially on thermal and hydro power plants) and of wildfires(driven by droughts, high temperatures, evaporation, and strong winds). More globally on physical risks
assessment, updates have been made to integrate latest scientific knowledge on climate changes
especially. Also, adjustments have been made to the policy risks methodology to update latest
transition scenarios, carbon prices and integrate up-to-date remaining 2°C carbon budget.

4.6 Climate Dashboard: A combination of historical and forward-looking metrics▪

Cost of climate in different scenarios:

Climate VaR (1,5°C scenario)
Total (Average)

Transition
Cost

Technology
Opportunities

Physical
Cost(Average)

[%]

[%]

[%]

[%]

-7,80

-9,70

4,60

-2,50

-9,18

-8,42

4,82

-5,77

-4,40

-6,10

4,10

-2,30

87 152 952 606,22 €

-5,19

-4,93

4,01

-4,33

-8,80

-10,40

4,30

-2,60

186 861 716 353,53 €-11,60-10,57

5,32

-6,64

2020

-8,00

-9,40

3,70

-2,30

2021

-10,41

-9,36

4,23

-5,56

2020

-5,90

-7,60

3,70

-2,00

2021

-7,63

-6,46

3,32

-4,68

2020

-8,90

-10,10

3,70

-2,50

2021

-13,59-12,66

5,26

-6,57

AUM

[€]
2020

coverage

Climate VaR (1.5°C scenario)[%]

AXA IM
2021

479 490 953 121,58 €2020

Equities

2021
2020

Corporate Bonds

2021

43%

89%
69%

2020

Sovereign Bonds

2021

205 476 284 161,83 €Benchmarks

MSCI World ACWI
BofAML Global
Aggregate Corporate

62%

98%
86%

2020

JPM GBI Global

2021

Source: AXA IM, MSCI, 2021

Climate VaR (2°C scenario)

AUM

AXA IM
Equities
Corporate
Bonds

[€]
2020
2021 479 490 953 121,58 €

[%]

[%]

[%]

[%]

-9,35

-11,06

-5,95

2,19

2020
2021 87 152 952 606,22 €2021 186 861 716 353,53 €2021 205 476 284 161,83 €PhysicalPhysical Cost
Cost
(Aggressive)(Average)
[%]
-2,50
-5,77

[%]

[%]

-7,66

43%

-5,66

89%

-8,87

69%

-2,30
-5,52

-6,83

-3,28

1,98

2020
2020

Sovereign
Bonds

Total
Total
Transition Technology(Average) (Aggressive)
Cost
Opportunities

coverage

Climate VaR (2°C scenario)

-4,33
-2,60

-11,67-13,62

-7,60

2,31

-6,64

Benchmarks
MSCI World
ACWI

2020
2021

-10,07-11,76

-6,66

-2,30
-5,56

1,93

2020

-7,50

62%

-6,25

98%

-8,93

86%

Physical Cost
(Aggressive)
[%]

[%]

-2,00

2021

-7,28

BofAML Global 2020
Aggregate
2021
Corporate
2020
JPM GBI Global
2021
Source: AXA IM, MSCI, 2021.

-8,76

-4,42

1,65

-4,68
-2,50

-13,24-15,18

-9,21

2,25

-6,57

AUM

AXA IM
Equities

2020
2021
2021
2020

Sovereign
Bonds

2020

2021
2021
2020
2021

MSCI World
ACWI

2020

BofAML Global
Aggregate
Corporate

2020

JPM GBI Global

[€]

Total
(Aggressive)[%]479 490 953 121,58 €

-8,34

-0,93

0,24

-7,66

43%

87 152 952 606,22 €

-5,89

-0,48

0,23

-5,66

89%

186 861 716 353,53 €

-9,81

-1,20

0,25

-8,87

69%

-8,41

-1,15

0,20

-7,50

62%

-6,81

-0,80

0,18

-6,25

98%

-10,23

-1,56

0,22

-8,93

86%

2020

Corporate
Bonds

Benchmarks

Climate VaR (3°C scenario)
Transition
Technology
Cost
Opportunities[%][%]

coverage

Climate VaR (3°C scenario)

2021

2021

205 476 284 161,83 €

2020
2021

Source: AXA IM, MSCI, 2021.

We applied this Climate Value-at-Risk model to all AXA IM’s investment portfolios - on corporate bonds
and listed equities - under 1.5°C, 2°C and 3°C scenarios deriving with an average and an aggressive
physical scenario. Compared to the average physical scenario, the aggressive scenario explores themost serious downside physical risks. As detailed in the table above, the results of this model show that
aggregated climate-risks represent a potential future risk of -9,35% (-5,77% for physical risks ; -5,95%
for transition risks; and +2,19% for green opportunities) of AXA IM’s total investments market value –on corporate bonds and listed equities – in the best scenario (1.5°C scenario combined with an average
physical scenario) and –7,66% (-8,34% for physical risks ; -0,93% for transition risks ; and +0.24% forgreen opportunities) the worst scenario (3°C scenario combined with an aggressive physical scenario).
This analysis using the MSCI Climate VaR model gives us a global insight of how climate change may
impact AXA IM’s total investment portfolios market value - on corporate bonds and listed equities.
However, this aggregated analysis obviously smoothes out heterogenous impacts amongst market
players: some will likely be far more impacted than others. According to MSCI CVaR model, following a
3°C scenario can be less impacting than a 1.5°C scenario as a rapid decarbonization scenario requires a

2020
AXA IM
2021
2020--- Equities
2021
2020
--- Corporate Bonds
2021
2020
--- Sovereign Bonds
2021
2020
Benchmarks
2021
2020
--- MSCI World ACWI
2021
2020
--- BofAML Global Aggregate Corporate
2021
2020
--- JPM GBI Global
2021
Sources: AXA IM, MSCI, 2021.

AUM

Warming Potential

[€]

[°C]
2,90
2,71
3,30
3,10
3,80
3,58
2,30
1,89
3,30
3,11
3,40
3,23
3,70
3,70
3,00
2,44

479 490 953 121,57 €87 152 952 606,22 €186 861 716 353,53 €205 476 284 161,83 €coveragequick and strong response in terms of carbon price increase, incurring a negative impact on transition
costs partially offset by the bold green technologies’ deployment in a lower climatic risks’ environment.
While a 3°C scenario is linked mainly to longer terms impacts on asset valuations with higher
discounting costs. Bear also in mind that the physical risk is modelled as the cost linked to theoccurrence of a set of, not exhaustive extreme weather events susceptible to cause businessinterruption and asset damages within a company and don’t reflect these extreme weather events
impacts at macro level. As a result, AXA IM does not leverage this complex and evolving metric in its
day-to-day investment, but it provides insights of the assets most at risk from climate change effects
and how AXA IM manages these risks year-over-year.

[%]
87%
93%
78%
93%
97%
99%
92%
100%

In 2021, global “Warming Potential” of AXA IM’s investments slightly decreased (from 2.9°C to 2,71°C)
while the global macro economy rebounded.
Based on MSCI’s model, the “Warming Potential” of AXA IM’s Corporate investments in 2021 reached3.10°C for equities and 3,6°C for corporate bonds with both a decrease of 0.2°C compared to 2020.
Notably, we observe that corporates’ Net Zero targets are more and more ambitious which tend tolower the “Warming Potential” of corporates based on their commitments. But countries’ NDC
commitments are also becoming more and more ambitious which tend to reduce global and sectoral
remaining carbon budgets and therefore make more difficult for companies to value theirdecarbonation efforts. This analysis partly explains why the global “Warming Potential” of AXA IM
corporate investments slightly decreased.
Based on Beyond Ratings’ model, the “Warming Potential” of AXA IM’s Sovereign investments in 2021
reached 1,89°C which represents an important decrease of 0.4°C compared to 2020.
Focus on Government bonds
In 2021, government bonds Warming Potential remain well below the benchmark. This is due to oursignificant exposure to French Government debt which has a low temperature score (1.6°C), mainly
due to the country’s low- carbon energy mix (essentially nuclear and hydro power) ; and to ourinvestments in the European Union countries in general which has lower temperatures than the UnitedStates which is overweighted in the benchmark.

Carbon performance
AUM

Carbon Footprint

coverage▪

[€][tCO2e / Mn$ revenues or
GDP]

[%]

2020

171

AXA IM
2021

479 490 953 121,58 €2020--- Equities
2021--- Corporate Bonds--- Sovereign Bonds

87 152 952 606,22 €137

186 861 716 353,53 €166

205 476 284 161,83 €149

Benchmarks

2020

256

2021

241

2020

205

2021

204

2020

319

2021

303

2020

217

2021

222

--- BofAML Global Aggregate Corporate--- JPM GBI Global

81%

145

(Equally weighted result on the
3 benchmarks below)--- MSCI World ACWI

95%

209

2020
2021

88%

152

2020
2021

153

92%

97%

99%
91%

100%

Source: AXA IM, Trucost-S&P, Beyond Ratings, World Bank, 2021.

The carbon intensity of AXA IM investments is of 153 tonnes of CO2 per millions of dollars of revenue
as compared to 241 tonnes for a reference similar benchmark. If Corporate Bonds are more carbon
intensive than both Sovereign Debt and Equities, each asset class will “save” carbon emissions ascompared to a similar market index.
Compared to 2020, we reduced the Carbon Intensity of our investments, which was equal to 171 tonnesof CO2 per millions of dollars of revenues.
Although there is a link between Carbon Intensity and Warming Potential metrics because carbon
intensity is included in the warming potential calculation, the temperature metric takes into accountother factors such as cooling and forward-looking metrics. For these two metrics, we use different data
providers and thus different methodologies: MSCI and Beyond Ratings for the Warming Potential,
Trucost-S&P for the Carbon Intensity.
▪

Green Share / Contribution to the Energy transition

In addition to “temperature-type” metrics, portfolio alignment can be measured as the contribution to
the energy transition considering two angles:i) Green investments (project-led green share): € 35bn AUMs84
AXA IM has been an active investor in green bonds, green buildings and green infrastructure and isplaying a key role in implementing the €24bn 202385 Green Investment initiative, announced by AXAGroup in November 2019. There are three categories of Green investments: Real Assets Green buildings
and Infrastructure, Green bonds and Green thematic equities. See more details below.

2020
2021
2020
Equities
2021
2020
Corporate Bonds
2021
2020
Sovereign Bonds
2021
2020
Benchmarks
2021
2020
MSCI World ACWI
2021
2020
BofAML Global Aggregate
Corporate
2021
2020
JPM GBI Global
2021
Sources: AXA IM, Trucost-S&P, Beyond Ratings, 2021.
AXA IM

AUM

Green Share

[€]

[%]
15,60%
12,05%
14,80%
15,51%
13,10%
10,33%
26,50%
12,14%
12,40%
11,16%

479 490 953 121,58 €87 152 952 606,22 €186 861 716 353,53 €205 476 284 161,83 €coverageii) Listed - Green Share: 15.6% average share of revenues holdings in portfolio is green activities

[%]
41%
23%
18%
69%
45%

11,04%

21%

10,70%

22%

11,75%

93%

The green share for listed investments is the value-weighted average share of green revenues of issuersin portfolio. These metric measures – all things equal – the level of greenness of investments andconstitutes AXA IM’s current interpretation of the Green Taxonomy. It will evolve over time as theregulatory requirements are clarified.
For corporate investments, we rely on Trucost S&P Green Share. Trucost S&P decomposes revenue mixof companies according to a proprietary taxonomy close to the French Label GreenFin grid. We focus
on an extended version of the Trucost S&P Green share (“dark green” activities and “green candidates”)– which will evolve over time.
For sovereign investments, the green share is based on the share of low carbon sources of energy(nuclear + renewables) in the total energy supply of one country provided by Beyond Ratings.
Due to the implementation of the EU Taxonomy Regulation in 202286, the calculation methodology of
the “Green Share” will evolve to be aligned with the eligible activities and environmental objectives.
This new metric will be reported next year in 2023 in this report.

84 Source: AXA IM as of 31/12/2021
85 See “AXA launches a new phase in its climate strategy to accelerate its contribution to a low-carbon and more resilient

economy”, AXA, 2019. AXA launches a new phase in its climate strategy to accelerate...
86 EUR-Lex - 32020R0852 - EN - EUR-Lex (europa.eu)

Source: AXA IM, as of 31/12/2021.

NB: the Listed Equity figure comprises the two “green” equity funds managed by AXA IM. Refer to thesection on green share for a more detailed assessment of the greenness of our investments.
Green Bonds
Our dedicated RI analysts within RI Research team defines the Green eligible universe as described in
RI offering section above.
At end 2021, AXA IM managed c. €15bn of green bonds selected according to our rigorous internal
green bond filtering process, an increase of 58.76% vs 2020. In addition, we invested c. €1.5bn in
Sustainability bonds.
Green Bonds Investments per project
category

Amount Invested in EUR mn

Renewable Energy

2%

2%

2%

1%

3%

4 680,62

Low Carbon
Transportation

4 500,94

Green Buildings

6%
32%
21%

Energy Efficiency

Waste Management

Biodiversity Conservation

31%
Sustainable Water
Management
Sustainable Land Use

Climate Change
Adaptation

Source: AXA IM, as of 31/12/2021.

3 099,65

958,36389,18325,24262,42

244,41

100,24

Real Assets Green Investments
Real assets represent a significant portion to the AXA’s Green Investment initiative. In order to define
assets as “Green”, specific criteria must be met for an individual asset as follows:
•

•
•
•

Real Estate: for property assets, our definition is limited to assets with a high level of third party
independent environmental certification (minimum level “Excellent” or “Gold”) and a minimum
Energy Performance Certificate (EPC) rating of “B” or equivalent for non-European assets.
Forestry: Sustainably managed forests as demonstrated by an FSC or PEFC certification
Commercial Real Estate Debt: for CRE Debt, similar to real estate, we consider loans securitizedby single assets with a certification (minimum level “Excellent” or “Gold”) to be green.
Infrastructure Debt & Equity: The definition for infrastructure is derived from accepted anddemanding market-based approaches. We rely on the taxonomy of the Climate Bond Initiative
to classify the infrastructure as green.

Some examples of green investments in the real asset portfolio include:
Asset ClassReal Estate

Example of investment
AXA IM Real Assets completed the development of a 62-storey, 278-metre
skyscraper in the City of London. The flagship development was completed with an
EPC rating of A+ and obtained BREEAM Excellent and WiredScore Platinum labels. In
operations, the building utilises 100% of electricity generated from renewablesources and offsets 100% of natural gas usage. Adding to the positive environmental
impact of the asset, 98% of construction waste was diverted from landfill. 10% of
floor space is dedicated to tenant amenity and wellbeing.
ForestIn December 2021, AXA IM Real Assets acquired a 24,800 ha PEFC-certified Forestry
portfolio in Australia in an area known as the Green Triangle that spans the southernborder of Victoria and South Australia. An estimated 8MtCO2 is stored in the forest.
Considering the change in soil carbon storage, natural forest growth, and harvested
volume of timber, we estimate a cumulative net carbon sequestration over 25 yearsof MtCO2 (excluding carbon lock-up in wood and avoided emissions).
Infrastructure AXA IM Real Assets completed the acquisition of a 49% share in a European rollingstock company. The company, headquartered in Austria, leases its growing fleet ofover 150 siemens electric Vectron locomotives to rail operators across central
Europe. Aligned with EU policy of transferring freight from road to rail and energysource from fossil fuels to a decarbonizing electricity grid, each locomotive can pulla train carrying the equivalent of over 70 heavy vehicles. These locomotives deliveran 80% reduction in carbon emissions versus traditional road transportation
vehicles.
Transition Bonds
In June 2019, AXA IM called for new “Transition Bonds” to help companies go green. While green bonds
have become established options for fixed income investors, AXA IM believes the asset class is at a
crossroads, with the potential for the bonds to be undermined by a desire for further issuance which
the sector cannot currently provide.
As such, AXA IM team called for a new type of bond that is required to help companies which are notyet green - and will therefore struggle to justify high quality and eligible for any “green taxonomy” green
bonds - to instead issue debt which is tied to them becoming greener businesses.

The bonds would be used by companies solely to finance transition projects, with a high level oftransparency around the bonds and their use to give investors’ confidence about how their capital isbeing deployed. These transition bonds would help investors overcome the major challenge ofproviding capital not just to companies which are already green, but to those which have ambitions tobecome so. A dedicated working group was created end 2019 at ICMA to work on this new asset class,and the first Transition Bond was issued in November 2019, and subscribed by our parent company.
In 2020, AXA IM invested €100 million in Transition Bonds issued by BPCE Group, contributing to thefinancing of energy transition assets87. These Transition Bonds’ proceeds will refinance Natixis’ project
and/or corporate loans, which have high emissions reduction potential and contribute to a low-carbon
economy, from relevant sectors such as, potentially, transport, power, midstream gas, mining andmetals, and building materials.
Since then, the transition bond market did not grow as expected, mainly because the market lacks aclear and common definition of what transition assets are – compared to green assets notably.
Sustainability-linked bonds (SLBs) seem to be the preferred type of instrument for climate transition
financing. We believe that SBs and transition bonds are complementary tools to achieve transition
objectives. Even if SLBs seem to have taken the lead over transition bonds when it comes to transition
finance, we still believe that use-of proceeds transition bonds have their place in the broad spectrumof ESG-themed bonds.
AXA IM’s Investments in Green, Social and Sustainability Bonds
Investments in Green, Social and Sustainability Bonds (EUR mn)€20 000€15 000€10 000€5 000€2017

2018
Green Bonds

2019
Social Bonds

2020

2021

Sustainability Bonds

Source: AXA IM, as of 31/12/2021.

We mainly invest in Green, Social and Sustainability bonds issued by Sovereigns, Supranational andAgencies.

87 See “BPCE issues €100 million of transition bonds, invested by AXA IM, to finance Natixis’ assets contributing to the energy

transition”, AXA Investment Managers, 2020. BPCE issues €100 million of transition bonds, invested by AXA IM, to financeNatixis’ assets contributing to the energy transition - AXA IM Global (axa-im.com)

AXA IM’s investment in Green, Social and Sustainability Bonds
80%
70%
60%
50%

Green Bonds

40%

Social Bonds

30%

Sustainability Bonds

20%
10%
0%
SSAs

Financials

Corporates

Source: AXA IM, as of 31/12/2021.

As part of our analysis of GSS bonds, we measure their contribution and their alignment to the SDGs.
There is no consensus yet on the way to approach the SDGs in the GSSB market. We therefore built ourown methodology and mapped the SDGs against our GSSB taxonomy. By doing this, we made a split
between the green and social activities that directly contribute to some of the SDGs, and those that
only align with it. Alignment is related to an indirect contribution to the SDG. Indeed, while they are notinitially targeted, a project can also provide an indirect positive impact to other SDGs.
For example:••

A renewable energy generation project directly contributes to SDG target 7.2 – “Increase
substantially the share of renewable energy in the global energy mix” – and align with SDG target
3.9 – “Substantially reduce the number of deaths and illnesses from hazardous chemicals and air,water and soil pollution and contamination”
A low carbon transportation project directly contributes to SDG target 11.2 – “Provide access tosafe, affordable, accessible and sustainable transport systems for all, improving road safety,
notably by expanding public transport” – and align with SDG target 9.1 – “Develop quality, reliable,
sustainable and resilient infrastructure, to support economic development and human well-being,with a focus on affordable and equitable access for all”

The strong contribution to SDGs 7, 8 and 11 is explained by the importance of Renewable energy
projects – which directly contribute to SDGs 7 and 8 -, Green buildings and Low-carbon transportation
projects – which directly contribute to SDG 11 – within our green bond investments.
The strong alignment with SDGs 3, 9, 11 and 13 is due to the same reasons, with Renewable energy and
Low-carbon transportation projects aligning with SDGs 3, 9, 11 and 13.

Contribution and Alignment to the UN SDGs
25%
20%
15%
10%
5%
0%
SDG 1

SDG 2

SDG 3

SDG 4

SDG 5

SDG 6

SDG 7

SDG 8

Contribution

SDG 9 SDG 10 SDG 11 SDG 12 SDG 13 SDG 14 SDG 15

Alignment

Source: AXA IM, as of 31/12/2021

Green, Social and Sustainability Bonds eligible universe
Our Green, Social and Sustainability bonds eligible universe is made of issuances in line with ourproprietary framework, on which our dedicated RI Analysts have a “Neutral” or “Positive Opinion”. All
GSSB that are not in line with our internal requirements are filtered out our eligible universe88.

Sustainable Bonds type

Negative

NeutralPositive

Total

Green Bonds

20%

41%

39%

100%

Social Bonds

19%

51%

30%

100%

Sustainability Bonds

27%

50%

23%

100%

Source: AXA IM, as of 31/12/2021.

88 These frameworks are used in a systematic manner by our Green Bonds and Social Bonds strategies. They are used to

inform the decisions of portfolio managers for other strategies without applying in a systematic manner.

Negative Opinions main drivers

Source: AXA IM, as of 31/12/2021

In 2021 the main reasons for which we assigned negative opinions were:••

Use of proceeds that is not in line with our expectations – e.g. lack of transparency, fossil-fuelrelated projects, development of airports…
Issuers for which the ESG quality & strategy is not robust enough – e.g. issuers under a severe
controversy, banks that big fossil fuel financing providers…

Compared to previous years, we noticed improvements on factors that were drivers of negative
opinions in the past, notably on commitment to provide impact reporting.
We assigned more negative opinions to sustainability bonds compared to green and social bonds fortwo main reasons:1.

2.

We sometimes lack details around the precise allocation of proceeds between green
and social projects, making us unable to calculate the green and social shares ofsustainability bonds
Issuer sometimes fail to identify relevant KPIs linked to the broad range of eligible
projects you can find with sustainability bonds

4.7 Introducing biodiversity-specific indicators
One of the key tools helping us to reach our objectives on biodiversity is the one being developed by
Iceberg Data Lab89 (IDL) and iCare&Consult90. IDL develops an innovative biodiversity-specific data used
to create a corporate biodiversity footprint (CBF) metric allowing us today to start identifying AXA IM
exposure to the risks of biodiversity loss by identifying contribution of issuers or sectors invested in tobiodiversity degradation.
The CBF measures impacts in terms of biodiversity loss associated with the pressures on biodiversity
generated by investees’ economic activities across their value chain. To draw a parallel with biodiversity
loss drivers identified by IPBES, CBF allows currently to capture relative loss of biodiversity caused by
the change of land use, GHG emissions (climate change contribution), water and air pollution generated
by a company’s activities throughout their associated value chain.
▪

Note that CBF is calculated via science-based models (Globio91) having their limits: suchdrivers of biodiversity loss as sea use change, invasive species, natural resources
overexploitation identified by IPBES are not yet covered by the IDL CBF solution.

▪

To advance further on the analysis of biodiversity loss drivers IDL, together with otherorganisations is a member of the EU Commission Align project the objective of which is
to co-develop recommendations for a standard on biodiversity measurements andvaluation.

The value chain approach integrated in the CBF allows to trace for a given company its relative
biodiversity footprint as regards the direct pressures generated by a company’s activities (GHG
emissions coming from the combustion of fossil fuels, surface artificialization coming from surface
occupied directly by the company, etc. - Scope 1), the pressures of a company induced by its electricity,heat, and cooling purchase (Scope 2) as well as all indirect pressures induced by company’s purchases
and supply chain (Scope 3 upstream) and company’s products and services at a use stage (Scope 3
downstream)92.
More concretely, calculation of the CBF is done in several steps (see the graph below):
1. Assess the commodities and products purchased and sold by the company throughout its
value chain based on IDL internal physical Input/Output model and allocate the company’s
product flows by sector (NACE sectorisation)93
2. Calculate the company’s environmental pressures (climate change, land use change, air
pollution and water pollution) identified by the CBF in relation to its products’ flows based ona life-cycle analysis (LCA)
3. Translate the environmental pressures through pressure-impact functions (GLOBIO) into one
and the same biodiversity impact unit,
4. Aggregate the different impacts into an overall absolute impact on a company level

89 Iceberg Datalab
90 I Care - Conseil en stratégie et environnement (i-care-consult.com)
91 GLOBIO - Global biodiversity model for policy support - homepage | Global biodiversity model for policy support
92 Scope 1, 2 and 3 are defined in line with GHG Protocol, same definitions of Scopes are used by IDL CBF for biodiversity.
93 The European classification system of economic activities

IDL Corporate Biodiversity Footprint Methodology

Input data on business activities

Step 1

Automated Data mining

Key Activity Metrics

Environmentally extended Input-Output (EEIO)
databases (incl. Exiobase) & Scientific literature

Step 2

Quantified environmental pressures based on Life-Cycle Analysis (LCA)
Climate change: in GHG emissions equivalentLand use change: in km2 occupied or transformed, etc.
Air pollution: in NOx and SOx emissions equivalent, etc.
Water pollution: in kg 1,4 dichlorobenzene (1,4-DB) eq (freshwater ecotoxicity), etc.

Step 3Pressure-Impact
relationship

Quantified Impact on biodiversity••••

Land Use (km2.MSA)
Climate Change (km2.MSA)
Air Pollution (km2.MSA)
Water Pollution (km2.MSA)

Step 4

Corporate Aggregated Biodiversity footprint (CBF) in a given
year

Pressurestranslated into one
single biodiversity
impact unit:
km2.MSAThe single unit of biodiversity impact used to calculate CBF is the Mean Species Abundance (MSA) 94.
Generally, MSA measures the average abundance of native species in a delimited space under the
influence of biodiversity loss pressures in comparison to undisturbed ecosystems (in %).
MSA is among most widespread biodiversity metrics today and presents several advantages:▪

It is relevant for biodiversity as based on species abundance it allows to quantify global
impact of human activities on ecosystems. MSA figures among recognised indicators
referenced by IPBES, IPCC, CBD.

▪

It has already been studied and tested by academics and professional experts▪

It offers a holistic approach to the biodiversity impact of corporates adapted to evaluate
biodiversity impact at an investment portfolio level allowing for comparison of sectors,
companies, and progress tracking

The impact calculated via CBF then results from the level of pressures generated (volumes of pollution
emitted, etc.) by a company’s activities considering the severity of nature disturbances provoked (levelof soil and water toxicity induced, etc.) and the relative surface affected (in km2).
▪

The CBF impacts are modelled in a local or global manner, depending on a pressure
modelled and respective modelling approach as well as the level of granularity as
regards data (commodities / countries). IDL works to localise progressively all modelled
impacts.

Aggregated, CBF provides a negative impact measure, meaning that by using this metric we cancalculate volume of biodiversity loss caused by pressures generated by a company’s economic activities
in equivalent surface of km2 of MSA identical to pristine forest lost or, otherwise saying, in equivalentsurface of km2 artificialized95 in a given year.
Interpret the CBF metric: What would a km2 MSA of -15 mean?
In other words, CBF of for example -15 km2 MSA for a given company can be interpreted as anequivalent surface of 15 km2 artificialized completely (i.e. 15 km2 of pristine forest lost) due topressures generated on biodiversity by a company’s activities across associated value chain(purchases, products and services) in a given year.
IDL calculates a biodiversity footprint on a company level, which can also be tracked at a sectoral level
and can then be aggregated at a portfolio level following the same logic as carbon footprint.

CBF at a company level
As presented above, on a company level the calculation of the CBF starts with identifying segments acompany is active in by providing a distribution of a company’s total sales per business line (product)and country.

94 This indicator was proposed as part of the development of the GLOBIO3 model, the objective of which is to simulate theimpact of different human pressure scenarios on biodiversity. The GLOBIO model was developed by PBL Netherlands
Environmental Assessment Agency to quantify global human impacts on biodiversity. (Source: IDL Methodology)
95 Artificialization of an environment, of a natural or semi-natural habitat is the loss of its qualities. The term refers to the lossof biodiversity and ecosystems destruction. Artificialization corresponds to the transformation of an environment due to thehuman presence.

▪

Sales data availability and granularity is a well-known challenge among data providers
and analysts today, the level of data quality is to be continuously improved.

Once the sales are mapped, IDL biodiversity tool traces the whole value chain associated to company’sbusiness segments based on input and output data from external databases (like Exiobase) as well as
IDL proprietary input and output model.
Nestlé (Agri-food)Company level analysis
Total Energies SE (Oil & Gas)

The company is active in different segments: The company is active in different segments:
cereals, dairy products, cocoa and chocolate, oil Natural gas, crude petroleum, diesel oil, motor& fats, bottled water, other.
gasoline, fuel oils, Kerosene and jet fuel, otherfuels, and others (petrochemicals, etc.).
Company reports well on the sales per segment
and per country and considers prices differences Company reports sales and prices data related to
between locations - a good disaggregation allows upstream and downstream (share of power
for a high-quality analysis.
generation) activities. The difficulty would be toidentify midstream (refineries, etc.).

Based on the value-chain mapping of a company’s products’ flows (Scope 1, 2 and 3), IDL tool uses lifecycle analysis (LCA) to calculate the level of land use change, GHG emissions, air pollution and waterpollution associated with a company’s activities. Using science-based pressure-impact functions(GLOBIO model96), IDL tool then translates all the four modelled pressures into biodiversity impacts
calculated in km2 MSA in a given year.
▪

A company reporting data on biodiversity pressures associated to its activities is still arare practice, most of the data used is modelled data. IDL publishes a Data Quality levelindicator for each company analysed to track reported versus modelled data.

Impacts are then aggregated into an overall absolute footprint on a company level – CBF.
Nestlé SA (Food company)

Total Energies SE (Oil & Gas company)

CBF: -19 248 km2.MSA

CBF: -7 959 km2.MSA

The biodiversity footprint of Nestlé is specificallydriven by the presence of such high-impact
commodities in its product mix as chocolate andanimal-related products, which require high land
use occupation including to breed and feed thedairy cattle (Scope 3 upstream).

As a fully integrated oil & gas company, Total
Energies' main impact on biodiversity is due to
GHG emissions originating from the combustionof sold products in the downstream value chain(>45%), followed by the impact of land use.

CBF at a sectoral level
In the context of rising environmental transition risks, those who seize this transition opportunity firstwill win economically while bringing real solutions on the ground to protect biodiversity and preserve
human living conditions. Most naturally, the high nature dependent activities and sectors, like foodindustry, represent the biggest challenges (food sector alone is responsible for almost 60% of global

96The GLOBIO model calculates only local terrestrial biodiversity intactness via MSA (sea or ocean are not considered):

GLOBIO - Global biodiversity model for policy support - homepage | Global biodiversity model for policy supportbiodiversity loss97), but also provide the biggest opportunities in terms of transition towards sustainableconsumption and development.
Agriculture, cattle breading, fishery as part of food value chain are traditionally viewed as having
important impacts on biodiversity and at the same time being depend heavily on nature. Unsustainable
livestock management, forestry, mining, construction, chemicals, infrastructure, energy (incl. fossil
fuels and biofuels) 98 are often associated with land-/sea-use change, natural resources
overexploitation, inefficient production, and waste management.
Last findings based on a combination of the three widely used biodiversity-specific tools (Iceberg Data
Lab (IDL), CDC Biodiversité 99 and ENCORE 100 ) 101 have identified Agrifood, Mining, Manufacturingindustries as both most impactful and most dependent on biodiversity followed by Construction,
Transportation and Energy. These are the sectors AXA IM would consider focusing on in the next years
to accompany those in reduction of their biodiversity footprint.
▪

Note that IDL methodology has some sectoral limitations. For instance, IDL informs clearly thatenergy consumption of very small electrical motors is overestimated due to general
methodological assumptions, etc.

Companies in these sectors putting in place transition solutions will register better results in terms of
production processes efficiency (operating cost reduction), will be more open to integrate innovationand new opportunities as well as will have better control over their resources and supply chain, which
will make them more resilient in the long run102.
The implications of biodiversity loss may vary not only from one industry to another, but also acrossgeographies. In its 2021 study103, Moody’s analysts show that approximately 60% of global biodiversityrelated controversies registered in its database originated from four countries: US, Indonesia, Malaysia,
and Australia. AXA IM considers using IDL CBF not only to identify most risky sectors and issuers, butalso to trace the exposure of those throughout the associated value chains to identify commodities,
activities as well as geographies exposed. Surely, this will require the biodiversity data and tools(including CBF) maturing progressively and moving from modelled to reported and much more locallyspecific data, which we hope to see in the future.
CBF at a portfolio level: AXA IM biodiversity footprint pilot
IDL calculates a biodiversity footprint on a company level, which can then be aggregated at a portfolio
level following the same logic and aggregation metrics as for portfolio carbon footprint. Biodiversity
footprint on a portfolio level is then estimated in km2.MSA / M€ invested. Note that currently, CBF data
aggregation on a portfolio level is done without treating double counting, this may change in the future.
AXA IM Biodiversity Dashboard

97 Building sustainable food systems | WWF
98 Global Assessment Report on Biodiversity and Ecosystem Services | IPBES secretariat
99 CDC Biodiversité | Parce que la biodiversité est essentielle (cdc-biodiversite.fr)
100 ENCORE (naturalcapital.finance)
101https://ec.europa.eu/environment/biodiversity/business/assets/pdf/F@B_Workshop3_Engagement%20with%20compani

es_Sector%20impacts%20&%20dependencies_22July2021_Slides.pdf
102 EU: 11/12/20 EU 2030 Biodiversity Strategy (EU Green Deal Long View)
103 “Controversy risk assessment: a focus on biodiversity”, Moody’s, May 2021. Available at:
60af61a9367371598fa6b807_BX6580_MESG_Biodiversity Controversies_27.05 (FINAL).pdf (website-files.com)

Equity Fund - biodiversity footprint

Fixed Income – biodiversity footprint

Top sectors contributing to the footprint are Top sectors contributing to the footprint are
Industrials, Utilities and Consumer Non-cyclical. Consumer Non-cyclical, Basic Materials and
Key issuers contributing to the footprint are Industrials. Key issuers contributing to the
Siemens AG and Trimble Inc for Industrials, Kerry footprint are Coca-Cola HBC and Carrefour forGroup and Zoetis Inc for Consumer Non-cyclical Consumer Non-cyclical sector, Arkema for Basic
sector as well as Nextera Energy for Utilities.
Materials as well as Amcor Plc and Nidec Corp for
Industrial sector. Continental AG can also be
This is mostly due to the importance of Scope 3
highlighted among top contributors to the fundimpacts for the issuers and activities stated above:
footprint.
scope 3 upstream with land use change as well as
GHG emissions and water pollution impacts This is mostly due to the importance of Scope 3
driving the footprint.
impacts for the issuers and activities stated above:scope 3 upstream with land use change mostly,
but also GHG emissions and Scope 3 air and waterpollution impacts driving the footprint.
The CBF model limitations discussed in the previous paragraph must be re-emphasized as the gradualstrengthening of the tool through users’ feedback, as well as methodology strengthening and reported
data enhancements are likely to lead to a high level of volatility in the metric disclosed from one year
to another.
The methodological constraints pertaining to the financial sector specifically must be equallyhighlighted: most of the impact coming from Scope 3 financial activities, the modelling of this impact ishighly dependent on the level of disclosure (volumes of revenues associated by type of activity, sectoral
allocation of funding, etc.) on each of the categories of financial activities (loan book, fundmanagement, intermediation, and other financial services, etc.). And if relative transparency on loan
books is currently provided by the banks, detailed information on other activities like asset
management is almost inexistent. This leads to high level of approximation in calculations impacting
the resulting impact data quality.
Generally, CBF provides a relative measure of biodiversity footprint on a company level – a footprint
based on scientific proxy estimations of species abundance, making it difficult to establish a link
between action on such proxy and an actual positive change in terms of biodiversity restoration on the
ground. IDL considers that today the impact data calculated reaches a satisfying level of quality,
meaning that in most cases biodiversity impact on a corporate level is modelled based on company's
reported sales by segments (with inputs and outputs as well as pressures being then modelled based

on sectoral averages). And if disclosure by companies on some Scope 1 and 2 pressure data (like GHG
emissions, etc.) increases progressively, Scope 3 remains totally modelled. CBF is thus not a reality
representing impact metric, but a theoretical proxy allowing to identify economic activities most at riskof contributing to biodiversity loss.
Still, with the first data appearing and calculation of footprint having become possible (despite
limitations), AXA IM is endeavoring to support development of biodiversity-specific metrics andindicators by integrating, testing those as well as sharing our experience and feedback with broader
investor community, our clients and tool developers as Iceberg Data Lab.
Namely, currently, IDL counts around 3 500 values covered in its global universe. The IDL global universe
construction is mainly based on such market indices as: MSCI ACWI index, Euro Stoxx 600 index,
Bloomberg Barclays Euro Aggregate index, etc., and the coverage may grow over time with thedevelopment of IDL biodiversity footprint solution. Small and medium companies are less represented
in the IDL global universe, which makes their coverage less extended in comparison to large
capitalisations. As of today, IDL solution provides CBF measure for corporate issuers mostly, but IDL
works to develop approaches to measure biodiversity footprint for sovereign issuers or private assets(infrastructure and real estate). We will closely follow the evolution of the IDL tool on these matters.

4.8 Disclosure communication
We believe it is vital to communicate with clients in the most transparent and comprehensive way
possible, to give them a complete analysis of responsible investment (RI) and help them understand it,
and its importance. All the main financial and non-financial information on every fund that has
integrated ESG criteria into its investment process is available on our Fund Centre. This is in accordancewith European and local regulations.
As described in detail below, we publish RI-related reports at entity and fund levels.
To help our clients measure the integration of ESG criteria into funds and to communicate in a clear
and transparent manner AXA IM has, since January 2019, included three ESG indicators - absolute ESG
score, relative ESG Score and carbon footprint (CO2 relative intensity) in business-to-business andbusiness-to-consumer reports for all our open-ended funds104. Our client reporting for institutional
mandates also incorporates a range of ESG information tailored to client requests.
In the first half of 2021 we improved our reporting by developing a portfolio level engagement reportwhich provides a sectorial, thematic and SDG breakdown at fund level, as well as detailing the numberof entities engaged, and other engagement-related indicators. This report will be strengthened in 2022with engagement case studies, while production is extended to more funds. Along with this improved
engagement report, a voting report will be published for all our ESG-integrated and ACT range funds.
To complement our enhanced RI reporting offering, in 2022, we will roll out and new and upgraded
ESG report across our portfolios which will include a range of new metrics, with a particular focus on
biodiversity as well as climate and carbon in line with recommendations from the Task Force on Climaterelated Disclosure (TCFD), but which will also include voting and engagement metrics. A specific impact
104 As of 31/12/2021, more than 94% of our open-funds Fund Factsheets include these metrics (excluding funds investing inboth Corporates and Sovereigns bonds).

report, a version of our ESG report enriched with quantitative indicators and qualitative impact
information, will be also deployed on our growing Listed Impact offering.

ESG Report: Environmental profile
Partnering with Trucost S&P, AXA IM discloses the carbon intensity of portfolios in the climate sectionof the ESG reporting of its RI funds, and in the standard reporting of all portfolios along with the ESG
score. Carbon intensity of portfolio relative to benchmark is analysed by distinguishing between asector allocation effect and an issuer selection effect. Carbon intensities are performed focusing on
both direct emissions (scope 1), emissions from electricity suppliers (scope 2) and from businesstravel (scope 3).
From 2022, the ESG reporting available for our Article 8 and Article 9 products include an enhanced
climate section, combining historic metrics (carbon intensity for scope 1 and 2 as well as upstream
scope 3) as well as forward-looking ones (incl. warming potential and proportion of companies with
Science-Based Targets in the portfolio). This reporting will also include the Net Zero profile of theportfolio.

AXA IM ESG Impact reporting: ESG Profile and Environmental Profile sections

Client interactions, inputs and expectations
As an active manager, we continuously engage with our clients to understand their needs andunderstand how we can help them to make informed investment decisions and invest in a sustainable
future. We are committed to answering their questions whether this is about market movements,
regulatory changes, asset allocation or future trends. We do this via surveys as well as conversations at
our own proprietary or industry events, and also regular interactions with our sales teams. This enables
us to improve our product offering as well as ensure that we have the right content andcommunications in place to stay relevant to clients’ changing needs and to answer the questions on topof their minds.
We are focused on empowering our clients across the institutional, wholesale and retail segments tobe able to confidently invest for a better planet, society and sustainable economy. In this context,
providing clients with relevant and timely information is key. We do this by creating thought leadership,
market commentary and educational content across multiple formats, such as research papers andarticles, webinars, events, videos, and infographics to provide clients access to our investment experts,
and at the level of detail they require. This content is then shared through a variety of channels, suchas our website, email, social media, and third-party websites for clients to access.

Our RI experts regularly interact with our institutional clients through joint meetings with ourinvestment teams when specific insights are required. Furthermore, our clients regularly send us due
diligence questionnaires through which we can identify new trends and requirements.
To support our retail clients with their continued learning, we have launched educational modules,
including the AXA IM Academy, an educational platform in the UK providing interactive, CDP-certified,financial learning experiences across several key areas of commercial interest: Investing, asset classes,
market factors and ESG/socially responsible investing. These have included our own bespoke AXA IM
modules.
At AXA IM we aim to be very attentive to market and client needs, best practices and new expectations
and these interactions are one of the ways through which we can identify our areas of potential
improvements.
•

Company level disclosure

The following content is available on our website:•

Annual Active Ownership and Stewardship Report
Annual Climate Report (aligned with the TCFD recommendation and Article 29 of the French
Energy Climate Law)
Annual Principles for Responsible Investment (PRI) report
Policies•••

Going into more detail about our stewardship reports, we are committed to provide transparency andregular reporting on active ownership, both internally and externally.
AXA IM’s RI activities are published and available publicly. Our full voting records are accessible publicly
and detail how we voted at general meetings of companies held on our clients’ behalf. In addition, we
publish an annual Active Ownership and Stewardship Report which includes information on RI issues,
engagement with companies, and aggregated voting records for the relevant year.
We also provide bespoke and customised reports aligned with specific client requests – the decision
whether to make the report public or private is made by the clients. This includes a statistical overview
and analysis of engagements conducted including breakdowns by theme and by the UN SDGs. There isalso information on progress made through engagement and details of where we consider success has
been achieved. We also provide a list of all issuers engaged with and on which specific themes.
•

Fund level disclosure

We have mentioned broader fund content above. For products classed as sustainable and impact in the
AXA IM range, the following content is made available to clients on our Fund Centre:▪
▪
▪

Transparency code
Voting Report (for equity and multi asset funds only) – with the AGMs voted and rationales
for any vote against the management
ESG Report

▪
▪
▪
▪

Impact Report for our range of Listed Impact funds
Engagement Report for Sustainable and Impact funds
Legal documentation (prospectus, Key Investor Information Document, annual reports, semiannual reports)
Monthly comments from the portfolio manager

4.9 Industry surveys
SurveyPRI annual
assessment

PRI Leaders’Group
ShareAction

H&K
Responsible
Investment
Brand Index
Influence
Map

Climetrics
2021 rankings

AXA IM ranking /score
Strategy andGovernance: A+
Listed Equity –Incorporation: A+
Listed Equity –Active Ownership:A+
Fixed Income –SSA: A+
Fixed Income –Corporate
Financial: A+
Fixed Income –Corporate nonfinancial: A+
Fixed Income –Securitised: A+
Property: A
Infrastructure: A
Member of the2020 PRI Leaders’Group
BBB – ranked 11th
/75
Ranked 37/65
Avant Gardist –Top Category

Date

Link

December 2020

2020 PRI Assessment Report

December 2020

The PRI Leaders’ Group 2020

March 2020

ShareAction report

December 2021
October 2021

ShareAction Voting Matters Report
AXA IM – Press Release

A

January 2021

A (Stewardship)

March 2022

30 out of 98 AXA
IM funds ranked
have received thebest score of 5
leaves (9,9% of
total 18,362 funds
rated have 5
leaves).

December 2021

influencemap.org Asset Managers and Climate
Change 2021
AXA IM implements AXA’s Stewardship strategy
Finance_and_Climate_Change_March_2022 (3).pdf
Climetrics - CDP

2021
Climetrics
Fund Awards

Reclaim
Finance – The
Asset
Managers
fueling
climatechaos, 2022

Clean Economy
strategy105 has
been awarded
with a Climetrics
Fund Award
AXA IM is ranked
first and is one ofthe only two asset
managers with ascore above theaverage (17.3 outof 30).
Analysis of theconsistency ofasset managers’
climate changecommitments andinvestment
practices

March 2022

Climetrics - CDP

April 2022

Reclaim Finance, The Asset Managers fuelingclimate chaos, 2022 (reclaimfinance.org)

4.10 Focus on our commitments
Status update on our progress towards our commitments are provided within this Article 29 – TCFD
combined report and in our 2021 Active Ownership and Stewardship report.
Commitments
AXA Investment Managers has reinforced its coal exclusion (30% ofrevenues) and added a new exclusion on tar sands (20% ofrevenues). The initial scope of application was for IR funds, and has
been extended in 2019 to all assets, excluding client opt-out or
GRC exemption
AXA Investment Managers made a commitment in 2020 to phaseout coal by 2030 in the OECD and 2040 for the rest of the world

Links
AXA IM Climate Risks Policy

AXA Investment Managers committed in 2015 to reach 75% ofcertified real estate assets by 2030 (in AUM)

AXA IM Real Assets – Vision 2030

AXA Investment Managers is committed in 2018 to achieving morethan >75% AUM assessed with the internal ESG rating tool (direct
real estate assets)
In 2020, AXA Investment Managers has integrated gender diversity
objectives into its corporate governance and voting policy

AXA IM Real Assets | Responsible
Investment

AXA Investment Managers is committed to including carbon
intensity in its standard reporting in 2019
AXA Investment Managers has committed in 2018 to include"forward-looking" indicators in our climate reporting
In 2020, AXA Investment Managers launched an initiative todevelop a tool to measure the impact of investments on
biodiversity

105 The products may not be registered nor available in your country.

AXA IM Climate Risks Policy

AXA IM to expand its gender diversity
voting policy for both developed andemerging market economies | AXA IM
Corporate (axa-im.com)
AXA IM Climate Risks Policy
AXA IM TCFD-Article 23 Report
AXA IM, BNP Paribas AM, Sycomore AM
and Mirova launch joint initiative todevelop pioneering tool for measuringinvestment impact on biodiversity | AXA
IM Corporate (axa-im.com)
AXA Investment Managers has committed to a 20% reduction of
the operational emissions of its direct real estate assets by 2025
compared to 2019 (and a net zero target by 2050)

AXA IM Real Assets | Responsible
Investment

Following the initiative launched earlier that year, AXA Investment
Managers announced in 2020 a partnership with Iceberg Data Lab
and I Care & Consult to develop indicators to measure the impact
of investments on biodiversity

ICEBERG DATA LAB and I CARE &CONSULT selected to provide first of its
kind biodiversity impact measurement
tool for investors | AXA IM Corporate(axa-im.com)
Full-year 2020 earnings | AXA IM
Corporate (axa-im.com)
AXA IM Climate Risks Policy

In 2020, AXA Investment Managers developed a charitable scheme
for its range of impact funds
AXA Investment Managers launched an engagement initiative in
2021 with issuers exposed to coal but whose operations are below
our exclusion thresholds
AXA Investment Managers has strengthened its Climate Risk policy
in 2020 and is committed to reporting on its progress in its annual
reports.
AXA Investment Managers has reinforced its 2021 Climate Risk
Policy for the Oil & Gas sector, on the engagement side.

AXA Investment Managers has extended its Climate Risk policy in2021 to the Oil & Gas sector, on the exclusion side.

In 2021, AXA Investment Managers has developed a "Three Strikes
and You're Out" engagement approach. In 2022, this policy applies
in particular to climate laggards.

AXA Investment Managers has strengthened its biodiversity
strategy in 2021 by expanding the exclusions of its Ecosystem
Protection & Deforestation policy (former Palm Oil policy)
AXA Investment Managers has strengthened its biodiversity
strategy in 2021 by reinforcing the engagement activities of its
Ecosystem Protection & Deforestation policy (former Palm Oil
policy)AXA Investment Managers renames its Sustainable fund range in
2021

In 2020, AXA Investment Managers made a commitment to the
Net Zero Asset Managers Initiative to achieve net zero emissions
by 2050 at the earliest. As part of this commitment, by 2022, AXA
Investment Managers will manage 65% of its total assets undermanagement in line with the Net Zero target, representing nearly€580 billion by the end of 2021.
AXA Investment Managers is implementing a new voting policy tofurther integrate ESG considerations into our voting in 2022.

AXA IM Climate Risks Policy

AXA IM further strengthens its climate
actions to accelerate its contribution toa low-carbon world | AXA IM Corporate(axa-im.com)
AXA IM further strengthens its climate
actions to accelerate its contribution toa low-carbon world | AXA IM Corporate(axa-im.com)
AXA IM intensifies pressure oncompanies to take meaningful action onsustainability issues with enhanced
stewardship focus | AXA IM Corporate(axa-im.com)
AXA IM expands its palm oil policy toprotect ecosystems and fightdeforestation | AXA IM Corporate (axaim.com)
AXA IM expands its palm oil policy toprotect ecosystems and fightdeforestation | AXA IM Corporate (axaim.com)
AXA IM renames its most focused ESG
funds to help simplify its sustainable
range for clients | AXA IM UK (axaim.co.uk)
65% of AXA IM’s total assets aremanaged to be in line with Net Zero |AXA IM Corporate (axa-im.com)

AXA IM unveils new voting policy tourge investee companies to further
consider environmental and social
issues | AXA IM Corporate (axa-im.com)

Appendices
1. Regulatory review
Article 29 of the French Energy Climate Law106
DecreeArt 1erIII- 1°
Art 1erIII- 2°
Art 1erIII- 3°

Content

Reference Sections

Entity general approach
Investors’ information
Article 8 and Article 9 Financial
products
List of initiatives, codes and principles
Internal resources and means
Reinforcement of internal capabilities
ESG Strategy oversight process
Remuneration policy
Management Board

2.1 AXA IM Responsible Investment Framework
4.8 Disclosure communication
Sustainable Finance (SFDR) (axa-im.com)

Scope of the stewardship strategy
Voting policy presentation
Art 1erIII- 4°

Engagement strategy results
Voting strategy results

Art 1erIII- 5°

Art 1erIII- 6°

Art 1erIII- 7°

Investment decisions
Taxonomy alignment and exposition
to fossil fuels
Paris Agreement Alignment strategy
Objectives
Methodologies used within the Paris
Agreement Alignment strategy
Results
Scope, impact on the investment
strategy and complementarity with
the RI Strategy
Policies to progressively exit coal andunconventional hydrocarbons
Monitoring, changes and updates
Biodiversity alignment strategy
Alignment with Convention on
Biological Diversity
Analysis of the contribution to the
reduction of main pressures andimpacts on biodiversity
Biodiversity footprint

Appendix 3. List of initiatives, codes and principles
1.2 Human and Technical Resources
1.2 Human and Technical Resources
1.3 RI Governance Committee
1.2 Human and Technical Resources
1.3 RI Governance Committee
2.6 CSR Strategy
2.1 AXA IM Responsible Investment Framework
2021 Active Ownership and Stewardship report
2.1 AXA IM Responsible Investment Framework
2021 Active Ownership and Stewardship report
2.1 AXA IM Responsible Investment Framework
2021 Active Ownership and Stewardship report
2.1 AXA IM Responsible Investment Framework
2021 Active Ownership and Stewardship report
4.2 Environmental Dashboard
Not applicable in 2022
2.2 Climate strategy
2.2 Climate strategy
4.6 Climate Dashboard
2.2 Climate strategy

2.2 Climate Strategy
4.2 Environmental dashboard
2.2 Climate Strategy
2.3 Biodiversity Strategy
4.7 Introducing biodiversity-specific indicators
2.3 Biodiversity strategy
2.3 Biodiversity Strategy
4.7 Introducing biodiversity-specific indicators
4.7 Introducing biodiversity-specific indicators

106 Article 29 - LOI n° 2019-1147 du 8 novembre 2019 relative à l'énergie et au climat (1) - Légifrance (legifrance.gouv.fr)

Art 1erIII- 8°

Identification, assessment,
prioritization, management of ESG
risks

Art 1erIII- 9°

Improvement and corrective actions

Only the identification process of sustainability risks isapplicable in 2022
Section:
3-Risk management
Not applicable in 2022

Recommendations of the Task Force on Climate-related Financial Disclosures107
Sections

Governance
Strategy

Risk Management

Metrics andTargets

107

Recommended Disclosures
Board’s oversight ofclimate-related risks andopportunities
Management’s role inassessing and managing
climate-related risks andopportunities
Identified Climate-relatedrisks and opportunities
over the short, medium,and long term
Impact of climate-relatedrisks and opportunities oninvestment strategy
Climate-related scenario
analysis (including a 2°C or
lower scenario)

Identification andassessment process ofclimate-related risks
Climate-related risks
management process
Integration of climaterelated risks identification,assessment andmanagement processes
into overall risk
management framework
Metrics used to assessclimate-related risks andopportunities
Disclosure of Scope 1, 2
and, if appropriate, scope
3 GHG emissions andrelated risks
Targets used to manage
climate-related risks andopportunities andperformance

Reference Sections
1.3 RI Governance Committees-

1.2 Human and Technical Resources
1.3 RI Governance Committees-

2.1 AXA IM Responsible Investment Framework
2.2 Climate strategy-

2.2 Climate strategy
4.4 Environmental dashboard
4.6 Climate Dashboard
2.1 AXA IM Responsible Investment Framework
2021 Active Ownership and Stewardship report
2.2 Climate strategy
4.3 Scenario analysis
4.4 Climate scenario
4.5 Forward looking metrics
4.6 Climate Dashboard
2.2 Climate Strategy
3.1 Mitigation of key sustainability risks
3.2 Factoring Climate risk in Real Estate Management
2.2 Climate Strategy
3.1 Mitigation of key sustainability risks
3.1 Mitigation of key sustainability
3.2 Factoring Climate risk in Real Estate Management
3.3 Internal Controls-

4.2 Environmental Dashboard
4.6 Climate Dashboard-

4.6 Climate Dashboard-

4-Metrics

Publications | Task Force on Climate-Related Financial Disclosures (fsb-tcfd.org)

2. Thought LeadershipResearch paper
COVID-19: Data privacy risks
and potential opportunities

Authors
Théo Kotula

Link
https://www.axa-im.com/covid-19-dataprivacy-risks-and-potential-opportunities

Putting ESG to work: A casestudy in the telecoms sector

Virginie Derue

https://www.axa-im.com/putting-esg-workcase-study-telecoms-sector

Net Zero throughinvestments: A pilot forintermediary target setting

Lise Moret, Thomas
Roulland, César Vanneaux

https://www.axa-im.com/net-zero-emissionsthrough-investments-road-testing-pilotintermediary-target-setting

EU Taxonomy: a pathway tosuperior corporate

Virginie Derue

https://www.axaim.co.uk/insights/responsibleinvesting/governance/eu-taxonomypathway-superior-corporate-sustainability

China green bonds: seeking
harmonisation in a sector
that could boost the climatechange fightThéo Kotula

https://www.axa-imusa.com/insights/responsibleinvesting/environmental/china-green-bondsseeking-harmonisation-sector-could

A wake-up call for the energy
sector? The IEA’s path to net
zero
A climate change
conundrum: Is there a sweet
spot for natural gas in theenergy transition

Olivier Eugène

https://www.axa-im.com/insights/futuretrends/sustainability/wake-call-energysector-ieas-path-net-zero
https://www.axaim.com/insights/responsibleinvesting/environmental/climate-changeconundrum-there-sweet-spot-natural-gas

Did 2020 deliver a premiumfor the top ESG equities?

Hina Varsani

https://www.axa-im.com/news-andinsights/investmentinstitute/sustainability/environmental/did2020-deliver-premium-top

Carbon offsets: A necessarytool, but only under close
scrutiny and precise

Virginie Derue

https://www.axaim.com/insights/responsibleinvesting/environmental/carbon-offsetsnecessary-tool-only-under-close

Are Europe’s oil and gas
majors prepared for the
climate change challenge?

Olivier Eugène, Augustin
Monnoyeur

https://www.axaim.com/insights/responsibleinvesting/environmental/are-europes-oiland-gas-majors-prepared-climate-change

Climate change: Howinvestors can help deliver a
Just Transition

Virginie Derue

https://www.axaim.com/insights/responsibleinvesting/social/climate-change-howinvestors-can-help-deliver-just-transition

Climate Change: theeconomic cost of inaction

David Page

https://www.axa-im.com/news-andinsights/investment-

Olivier Eugène

institute/macroeconomics/macroeconomicresearch/climate-change
Playing with fire: Measuring
emissions from the world’s
oil and gas fields

Olivier Eugène

https://www.axaim.com/insights/responsibleinvesting/environmental/playing-firemeasuring-emissions-worlds-oil-and-gas

3. List of Initiatives, Codes and Principles
AXA Investment Managers seeks to comply and adhere to various principles, standards, and codes,
considered best practices in the market, which govern our policies and practices.
Codes / Principles
United Nations Principles for Responsible Investment
UK Stewardship CodeJapanese Stewardship CodeTask Force on Climate-Related Financial Disclosure

Signature date
2007
2010
Signatory of the revised UK Stewardship Code in 2020
2014
2017

We also support and participate to a number of initiatives focusing on sustainability topics where webelieve our involvement will have a material impact. These industry initiatives and groups are intended
to reflect on the evolution of practices, establish standards, support companies to address global
challenges and/or provide solutions. Please refer to our 2021 Active Ownership and Stewardship report
to find the list of initiatives and groups in which we are involved.

4. AXA IM climate metrics solutions mix - methodology description at a
glanceHistorical Climate KPIs
Carbon Footprint – Corporate Investments (Trucost S&P)
The amount of carbon dioxide released into the atmosphere as a result of the activities of aparticular organization and first tier indirect (GHG emissions from operations that are owned orcontrolled by the company & from its direct suppliers. It is expressed in CO2 tons per millions $revenue. The carbon footprint is calculated from the carbon emission of each company (scope 1
and 2 + scope 3 business travel) and from their turnover.
Carbon Intensity by revenue (EV) – Corporate Investments
Environmental KPI provided by Trucost S&P. The amount of carbon dioxide released into theatmosphere per million $ of revenue. It is expressed in CO₂ tons per millions $ revenue (invested).
The carbon intensity is calculated from the carbon emission of each company (scope 1 + scope 2 +scope 3 upstream emissions (of direct suppliers)).
Carbon Footprint – Sovereign Investments (World Bank)
Carbon dioxide emissions are those stemming from the burning of fossil fuels and the manufactureof cement. They include carbon dioxide produced during consumption of solid, liquid, and gas fuels

and gas flaring. Carbon Footprint for sovereign debt is expressed in CO2 tons per millions $ GDP
PPP.
Green Share – Listed Assets (Trucost S&P)
The French government’s TEEC label (Energy and Ecological Transition for Climate Change) provides
different types of activities that can be categorized as “green”. The classification is based on the
Climate Bond Initiative green categories where they have determined which type of activities canhave a positive impact on the environment and on climate change. Trucost green taxonomy includes
the followings activities from Energy and Utility sectors as ‘Core green’: Geothermal Power
Generation, Hydroelectric Power Generation, Solar Power Generation, Wave & Tidal Power
Generation, and Wind Power Generation. At AXA IM, we have decided to exclude nuclear activities
from green activities. We also include activities classified as ‘Green candidate’ to the green share
which are green activities outside Energy and Utility sectors. The green share is calculated aspercentage of revenues coming from Core green and Green candidate activities.
Green Share – Listed Assets (BeyondRating)Share of low-carbon energy in primary energy use. Energy included in the calculation of the green
proxy: hydropower, wind, solar, geothermal, tidal, nuclear.

Forward Looking Climate KPIs
Corporate Warming Potential (MSCI)
Warming Potential is a powerful tool that can provide an overall assessment of how companies andissuers can contribute to the convergence to a low sustainable carbon world. Climate model
providers offer data and methodologies by which investors can calculate company or portfolio-level
temperatures which can be compared to the 1.5°c target. Such a temperature is also a good way toincentivise dialogue and action by all agents involved such as companies and investors.
The model developed by MSCI relies on a top-down approach by combining country-level, sectoragnostic and sector-specific warming potential functions (translating tons of GHG emissions into
potential global warming) with company-specific decarbonation capacities and targets. Notably, thismodel relies on :• country-level projecting carbon intensities to 2030 which corresponds to the horizon of the
Nationally Determined Contributions (NDCs) presented to the COP26;• gaps between NDCs and carbon emissions budget associated to various temperature scenarios(according to the UNEP Gap report);• company-level business mix structures by sectors and countries ;• company-level current carbon intensities;• R&D in green technologies/products highlighting “transition” opportunities.
Climate Value at Risk metrics (MSCI)
Climate Value-at-Risk (Climate VaR) model developed by MSCI represents an estimation of how thevalue of AXA IM’s investment portfolios – on corporate bonds and listed equities - could be impacted(up or down) by climate policy risk, technology transition opportunities and extreme weather eventson a 15-year time horizon. This model is currently applicable only to corporate assets (not tosovereign assets) and it is in continuous development.
• Policy Risk Climate VaR (transition costs)
The transition to a low-carbon economy through market and regulations changes may
significantly negatively impact businesses and their investors. Policy Risk Climate VaR metricassesses how regulations stemming from countries’ Nationally Determined Contributions(NDCs) affect a company whose activities are directly (Scope 1) and indirectly (Scope 2 andScope 3) producing greenhouse gases (GHG).
• Technology Opportunity Climate VaR (green opportunities)
The transition to a low-carbon economy may also lead to new opportunities for businesses andtheir investors especially through the development of green technologies. Technology
Opportunity Climate VaR metric assesses the future potential revenues of companies comingfrom these green opportunities. While it is certainly not the only factors to be considered toestimate future green revenues, this analysis notably relies on companies’ green patents andcurrent low-carbon revenues.
• Physical Risk Climate VaR
Physical climate risk scenarios define possible climatic consequences resulting from increased levelsof GHG emissions, and the ensuing financial burden (or opportunity) borne by businesses and theirinvestors. Physical Risk Climate VaR metric assesses how much companies are exposed (notably via
their geographical location, the size and value of their assets, …) and vulnerable (notably via theircapacity to adapt) to increasingly frequent and severe extreme weather events.
Sovereign Investments’ temperature (Beyond Ratings)
The Beyond Ratings methodology allocates a carbon budget by country supporting various warming
scenarios, depending on key macroeconomic variables such as GDP growth, population growth,energy supply mix carbon-content and energy efficiency. National carbon pledges (NDCs) that havebeen expressed in the Paris agreement are used to build a homogeneous allocation of CO2 emissions
reduction commitments by countries by 2030. Country-level carbon intensities are then comparedto the 2°C compliant carbon intensities. More generally, using the theoretical linear relationshipbetween carbon emissions and temperature rise, Beyond Ratings define a corresponding
temperature based on country-level 2030 carbon commitment intensities.
Climate KPIDefinition
Historical Climate KPIs
CarbonFor Corporates, we rely
Footprint
on Trucost-S&P’s
methodology which uses
the carbon emission of acompany (scope 1 and 2+ scope 3 businesstravel) compared to its
turnover.
For Sovereigns, thecarbon footprint is basedon emissions stemmingfrom fossil fuels’ burningand the manufacture of
cement, expressed in
CO2 tons per millions$ GDP PPP

Pros

Cons

• Carbon Footprintprovides an easy way
to compare
companies ofdifferent sizes andfrom different sectors,
countries• Carbon footprint also
allows for historical
tracking• Carbon footprint
expressed per millions$ of added value(revenues, GDP …)
also enables
comparisons between
various asset classes• Carbon Footprint
underestimates the climate
impact of companies’
activity as it generally does
not account for scope 3
downstream and all theemissions from the value
chain• Carbon Footprint isbackward looking and does
not take into accounttransition strategies
undertaken by companies(decarbonization objectives& targets, green capex, rollout strategy to shift fromcarbonized activities …)• Carbon footprint would be
more relevant using aphysical output, such as CO2
pet tonne of cement or per
kWh of electricity, but thisGreen Share

Provided by Beyond
Rating on listed assets,share of low-carbon
energy in primary energy
use.

Country green shareprovides a way ofmeasuring the part ofgreen energies in theenergy mix of a country

Provided by Trucost for
listed assets, percentageof revenues in green
sectors

Listed assets green
share provides thepercentage of revenuesof a company comingfrom green activities

Forward Looking Climate KPIs
Investments’ For Corporates, thetemperature Investments’Temperature (based on
CarbonDelta-MSCI’s
methodology) relies oncarbon budgets whichareallocatedbycompany according tothesectoralandgeographical structure of
its assets or revenues.
For Sovereigns, theInvestments’Temperature(usingBeyondRatings’
methodology)is• The investment
temperature
constitutes a good
synthesis of all theelements to consider
to test for warming
scenarios alignment ofissuers andinvestments• Investments’temperature provides
a sense of alignment
at asset level andportfolio level, when
this notion generally

makes an aggregation at theportfolio level morechallenging• The green share currently
focused on already green
technologies or assets tends
to underestimate the energy
transition by not considering
enough transition andenabling activities• The country green sharetends also to overestimate
the greenness. The
definition of the green sharewill need to be adapted to
the new EU taxonomy
guidelines and in particular,
to its eligibility criteria andits evolution regarding sometechnologies• The company green sharedoesn’t include nuclear
power generation becauseof controversies on this
topic. This green share will
also have to be reviewed inaccordance with the new EU
taxonomy• For electricity producers,
calculating the green shareof power generation (e.g.
MW of renewables in % of
total MW) would be a more
relevant metric• Temperature at portfolio
level makes no sense in reallife and under physics laws
as global warming must be
understood at a macro level• For now, none of thetemperature models
available in the market are
fully satisfying andexhaustive enough to be theonly metric used foralignment testingcalculated using Carbon
budgetbycountry
supporting
variouswarming
scenarios,
dependingonkeymacroeconomic
variables such as GDP
growth,population
growth, energy supply
mix carbon-content andenergy efficiency

applies to an overall
economy5. B2B Factsheet
Example of B2B/ B2C monthly report including RI metrics: ESG score and Carbon footprint (absoluteand relative). These reports are available on our Fund Centre.
As of 31/12/2021, these metrics are included in more than 94% of Fund Fact Sheets of our purecorporates (equities and fixed income) open-ended funds.

All quantitative information, except otherwise specified, is un-audited and provided based on internal
methodology. While such information are believed to be reliable and accurate, none of AXA IM or its respective
affiliates, directors, officers, employees, partners, members or shareholders assumes any responsibility for theaccuracy or completeness of such information. The information has been established on the basis of data andhypotheses which are subjective. This analysis and conclusions are the expression of an opinion, based on
available data at specific date. The information is therefore subjective and subject to change from time to time
without prior notice.
To the extent SFDR has been applicable for a relatively short period of time, the classification under SFDR is subject
to adjustments and amendments, as certain aspects of SFDR may be subject to new and/or different
interpretations than those existing at the date of this Report. As part of the ongoing assessment and current
process of classifying its financial products under SFDR, AXA IM reserves the right, in accordance with and within
the limits of applicable regulations and legal documentation applicable to its financial products, to amend theclassification of a particular fund to reflect changes in market practice, in its own interpretations, in SFDR-related
laws or regulations or in currently-applicable delegated regulations, in communications from national or European
authorities or court decisions clarifying SFDR interpretations. Investors are reminded that they should not basetheir investment decisions on the classification presented pursuant to SFDR.
This document is for informational purposes only pursuant to Article 29 of Law No. 2019-1147 of 8 November
2019 relating to the Energy and the Climate and does not constitute investment research or financial analysis
relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on thepart of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products orservices, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for aninvestment strategy or a personalized recommendation to buy or sell securities.
Any mentions of products or strategies are for illustrative purposes only. The targeting of specific SDG does not
imply the endorsement of the United Nations of AXA Investment Managers, its products or services, or of its
planned activities and does not constitute, explicitly or implicitly, a recommendation for an investment strategy.
The products or strategies discussed in this document may not be registered nor available in your jurisdiction. In
particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation
S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares orunits in the fund depends on each investor’s tax status or treatment and may be subject to change. Any potential
investor is strongly encouraged to seek advice from its own tax advisors.
Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes
any express or implied warranties or representations with respect to such data (or the results to be obtained by
the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy,completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without
limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related tocompiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential
or any other damages (including lost profits) even if notified of the possibility of such damages. No further
distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.
Issued by AXA Investment Managers Paris – Tour Majunga – La Défense 9 – 6, place de la Pyramide – 92800
Puteaux. Portfolio management company with AMF approval No GP 92-08 dated 7 April 1992. A public limited
company (S.A.) with capital of €1,384,380, entered in Nanterre business register (RCS) under number 353 534506.
In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.