August 2024

2024 Putting
ESG to work:
Integration
into platforms
Our purpose isto act for humanprogress byinvesting forwhat matters.
This report is our
purpose in actionand evidence ofour commitment
to transparency
Marco Morelli,
AXA IM Executive Chairman

ESG Integration into platforms

Putting ESG to work
AXA IM is a long-term, responsible
investor with the aim of delivering
sustainable returns for clients. Over time,
our investment processes have evolved
to reflect an ever-greater focus on nonfinancial factors. We believe by building a
powerful understanding of the ESG risks toan investment, we can better target thosesustainable returns while contributing tobetter outcomes for people and the planet.
We aim to achieve this goal via indepth research, data analysis and theconstruction of portfolios which lookto optimise both financial and nonfinancial factors. Our investment process
reflects our core belief that a focus onsustainability can ultimately deliver thebest economic and financial performanceover the long term.
Our quantitative and qualitative ESG
research is designed to help us better
understand the materiality of ESG
challenges for sectors, companies,and countries. This research feeds our
integration and exclusion strategies byidentifying where assets might be exposed
to ESG risks that could have a detrimental
and irreversible effect on the performanceof our portfolios, as well as on long-term
global sustainability. Our normativeand sectorial exclusions, applied tothe majority of our actively managed

funds, set the red lines and send a clear
message to companies and sovereigns
on what we consider unacceptable froman ESG perspective. For assets where weremain exposed, we apply our voting andengagement strategies with the objectiveof supporting issuers in their transition
journey.
In applying our stewardship strategy, forengagement with objectives, we aim toset out meaningful objectives which areclearly communicated to management.
We then hold regular meetings to verify
and evaluate progress and we vote withconviction or pursue other escalation
techniques when required.

Our risk identification process
Our broad approach tosustainability risks‒Social: Health (tobacco producers),
labour, society and human rights(violations of international norms
and standards);35 controversial
weapons manufacturing; white
phosphorus weapons producers;
exclusion of investments insecurities issued by countries
where serious violations of humanrights are observed‒

Governance: Business ethics(severe controversies, violationsof international norms andstandards); corruption (severe
controversies, violationsof international norms andstandards)

AXA IM uses an approach to sustainability
risks derived from the integration of ESG
criteria in our research and investment
processes in accordance to their SFDR
or equivalent classification. We have
implemented a framework to integratesustainability risks in investment decisions,which relies notably on:• Sectorial and normative exclusions
policies covering ESG factors to exclude
assets exposed to the most severe
sustainability risks identified during ourinvestment decision-making process‒

35

Environmental: Climate (coalmining 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); andsoft commodities (food commodities
derivatives)• Proprietary ESG scoring
methodologies:‒

On listed assets, we apply ESG
scoring methodologies forcorporates, sovereigns and on
green, social and sustainability
bonds. We use an ESG scoring

methodology called Q²(qualitative and quantitative)
which relies primarily on index
provider MSCI with some
proprietary add-ons whichconstitute the value-added of
AXA IM’s ESG scoring capacity:
coverage, fundamental
analyses, and instrument-level
differentiation;‒

Specific ESG scoring
methodologies have beendeveloped for real assets(direct real estate property,
infrastructure debt & equity,commercial real estate (CRE)
debt), as well on alternative
credit and private debt scoring
methodologies (i.e., leveragedloans, collateralised loan
obligations (CLOs), asset-backed
securities (ABS), insurance-linked
securities (ILS), regulatory capital(RegCap), non-performing loans(NPL), our impact investments (incompanies, projects and funds),

UN’s Global Compact Principles, International Labour Organization’s (ILO) Conventions, OECD Guidelines for Multinational Enterprises and the UN Guiding
Principles on Business and Human Rights (UNGPs).

2 AXA IM Stewardship Report 2023

and non-listed private equity anddebt through our subsidiary CAPZA);‒‒

On funds of funds or funds of
mandates managed by AXA IM
Select36, ESG scores are assigned
at manager and fund level. Those
ESG scores are the result of an
ESG due diligence covering fourareas: i) policy and governance ii)
ESG integration iii) engagement
and stewardship, and iv) risk andreporting;On funds of funds managed by
AXA IM Prime, ESG scores areassessed at manager and fundlevel through proprietary ESG
Due Diligence & Monitoring
Questionnaires (DDMQ) assessing
firm and fund responsibility forprimary and co-investments for all
AXA IM Prime verticals (i.e., private
markets, including private equity,
private debt, infrastructure, andhedge funds), as well as direct
strategies (general partner level
scoring). A tailored approach applies
to secondaries investments.
We believe this combination of
external quantitative and internal
qualitative ESG analysis helps us
identify best-in-class companies –and laggards too. The use of ESG
scores in the investment decision
process should enable us to focus
on assets with an overall better ESG
performance and to seek to reducesustainability risks.

This framework is complemented by:• In-house ESG research37 on key
themes including climate change,
biodiversity, gender diversity andhuman capital, responsible tech aswell as on human rights and corporate
governance, supported by broker

research as well as regular meetings
with companies, participation in
conferences and industry events. We
think this research helps us to better
understand the materiality of these
ESG challenges for sectors, companies
and countries• Internal qualitative ESG and impact
analysis at company, country andinstrument level. For impact-related
investments, we have developed specificImpact Qualitative Analysis frameworks
for listed equities and Green, Social andSustainability Bonds• ESG KPIs: Investment teams have accessto a wide range of extra-financial data
and analysis on ESG factors, across asset
classes• Stewardship strategy: We adopt anactive and impactful approach tostewardship38 (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 well as driving positive impacts
for our society and the environment.
We believe these are key to achieving
sustainable long-term value creation forour clientsControls

The ESG and climate themes are coveredby AXA IM’s control framework, withresponsibilities spread between thefirst level of controls performed by thebusiness and second level of controls
performed by dedicated teams.
ESG-related investment guidelines consistof our exclusion policies, as well as ofeligibility criteria and rules specific to somefunds, including those which have been

awarded sustainability-related labels.39
Monitoring is carried out as follows:• The portfolio management teams
are primarily responsible for the
implementation of policies andcommitments. Funds’ specific RI
objectives are reported in monthly
Investment Oversight Forums.
Following ban lists and/or eligible
universe updates, portfolio managers
divest from issuers taking into accountthe client’s or the fund’s best interest• The investment guidelines teamensures independent and systematic
pre- and post-trade controls on policies
and fund-level commitments. This
team monitors the correct applicationof the exclusion lists derived from toplevel RI policies and ESG Standards,
sustainability-related labels and otherfund-specific commitments as mentioned
in their regulatory documentation• The compliance department carries out
ad hoc controls on the work performedby the investment guidelines team, butalso makes sure that RI internal processes
are respected, and ensures compliancewith regulatory requirements in AXA IM’s
RI strategy• The risk management department
assesses the likely impact of sustainability
risks on the products’ return and classifies
them within three levels: Low, Mediumand High40• The audit department performs periodic
controls. Audits are performed according
to an annual risk-based audit plan,
which is approved and monitored byour governance bodies, in particular
the AXA IM Audit & Risk Committee.
Higher risk areas and those required byregulations to be covered regularly are
subject to audits on a more frequentbasis compared to the less risky areas,
which are covered over a longer cycle.

Previously managed by Architas and assets from AXA Group’s general accounts.
Sustainability, AXA IM, retrieved February 2024
38
Stewardship & Engagement, AXA IM, retrieved February 2024
39
Such rules are described in the regulatory documentation of the products.
40
Sustainable Finance, AXA IM, retrieved February 2024
36
37

AXA IM Stewardship Report 2023 3

ESG Integration into platforms

Putting ESG to work
Identification of Risks
The Emerging Risk Management
Framework aims to ensure theconsistency of the process ofidentification, assessment, mitigationand management of the emerging risks
faced by AXA IM.
Emerging risks are those which may
develop in the future, or which alreadyexist and are evolving. They are marked bya high degree of uncertainty, and some ofthem may even never emerge. Emerging
risks can have potentially serious
consequences if they are not anticipatedin a timely manner.
Chief risk officers are responsible forearly detection of risks. The objective of
emerging risk management is to reinforce

the anticipation and monitoring dimensionof risk management.
The Emerging Risk Management
Framework is designed to enhance AXA IM’s
understanding of these risks and allow
us to adapt our business and processes
accordingly. By encouraging a foresightapproach, it is also an opportunity for risk
management functions to contribute to thestrategy of the company.

Emerging risk definition
Emerging risks are those which could
potentially be impactful in the next fiveto-10 years. They are defined as either
new risks, or risks that already exist but

one or more of the components of therisk’s current dynamics are not adequately
understood, be it hazard, exposure and/or
vulnerability to the hazard.

Emerging risk framework and2023 outcomes
The Emerging Risk Management
Framework includes:• Risk identification: The risk
identification is performed throughinterviews with key stakeholders froma large number of AXA IM departments(including investment platforms,
client group, legal, the regulatory
development team, innovation team,responsible investment team, Human
Resources, etc.) and with inputs fromAXA IM executives• Risk Prioritisation: All risks areassessed according to their severity
and their impact time horizon. Risks
are then prioritised using the severity
assessment performed, and basedon any other relevant prioritisation
criteria• Mitigation actions: As part of thisexercise, existing mitigation plans are
identified, and new mitigation plans
are agreed where relevant
The outcomes of the emerging risks
exercise are discussed at the AXA IM
Global Risk Committee. Since 2022, wehave been progressively integrating
the identification of ESG-related risks
withing our Emerging Risk Management
Framework. As such, risks related to ESG,
including climate change, biodiversity andmore broadly linked to the deploymentof sustainability-related regulations
are included in the top emerging risks
identified for AXA IM. To mitigate theserisks, a specific internal governance is now
in place, involving stakeholders dedicatedto sustainability-related topics.

4 AXA IM Stewardship Report 2023

AXA IM Core

We believe the consideration of nonfinancial factors, specifically ESG issues,
can help us deliver sustainable returns
over the long term.
There are four key reasons why we believe
considering such factors is important:• They can help identify companies withserious ESG risks• They can help improve ourunderstanding of how long-term
issues are integrated into a company’s
strategy• They allow us to refocus portfolios
around companies we think have
implemented good practices in terms of
their ESG impact• They can inform an active dialogue
around the management of ESG issues,potentially helping improve companies’
performance and thereby limiting ourongoing exposure to risks
AXA IM Core has a comprehensive andproactive approach to integrating ESG
factors into the decision-making processacross equity, fixed income and multiasset platforms. This approach, which
consists of the three pillars below, not only
allows us to assess risk and return more
systematically but also has the potential tocreate positive impact and contribute to amore sustainable future.
1. ESG data & research: Integration of ESG
data & qualitative analysis to evaluate
investment risks and opportunities aspart of the investment process
2. Exclusions: Apply Top-level and ESG
Standards exclusions to mitigate
adverse ESG risks and set clear
standards for sustainable investing
3. Stewardship: robust & measurable
voting and engagement, where wefocus on strategic ESG issues andengage with companies before risksmaterialize
41

In equity portfolios managed with aquantitative approach, ESG scores and key
performance indicator targets are added to
traditional alpha and risk measures. This
ensures the highest ESG rating is favoured
in portfolio construction when facedwith identical stocks from a traditional
investment perspective. In addition, ourresearch has shown that boardroom
diversity influences companies’ profitability,
and as such, we explicitly consider diversity
in our proprietary models to measureearnings quality. This approach, which
consists of the three pillars below, helps
us to manage risk effectively and create apositive impact by investing in companies
which prioritise ESG factors.
In equities managed with a judgmental
approach, the investment teams work
closely with dedicated equity ESG &Impact analysts. These experts conduct
their proprietary fundamental research on
extra-financial criteria of companies underinvestment consideration. Their role is toanalyse corporates on ESG considerations
from both a risk and opportunities
perspective. In addition they perform
impact assessments on companies todetermine eligibility for inclusion in ourlisted equity proprietary Impact universe.
In fixed income, our credit analysts use ESG
measures to identify material concernsthat could impair the credit quality andlong-term sustainability of issuers. By
incorporating a wide range of ESG factors
into credit analyses, we can identify thoserisks most relevant to credit investors andpotentially minimise downside risk. ESG
factors are also important for sovereignand quasi-sovereign debt and are therefore
integrated into our investment process,with different quantitative indicators forsovereign issuers to corporate issuers.
The Multi-Asset platform leverages the ESG
integration within the Equity and Fixed
Income platforms. We actively participate
in sustainability dialogues with company
management to encourage responsible

corporate behaviour and disclosure practices.
We believe this approach not only creates
positive impact but can also potentially generate
long-term benefits for our clients.
As of the end of 2023, AXA IM Core managed€399bn in assets which integrate ESG
criteria. Furthermore, €35bn of assets undermanagement have been awarded with the
French sustainability label ISR41 and €7.8bn
with the Belgian Towards Sustainability label.

Our fund and strategy offering
Our mission is to meet the ever-increasing
demand from clients through a comprehensive
and innovative range of strategies and openended funds, many of which place sustainability
at the heart of their objective and therefore go
beyond mere ESG integration. Our range has
also been designed in line with AXA IM’s overall
priorities such as climate and biodiversity, andincludes:1. ESG integrated strategies where investment
teams take account of ESG risks andopportunities when making investment
decisions and where ESG is embedded in
the investment process to help achieverisk-adjusted returns. In most cases ourportfolios also explicitly include an ESG score
objective and/or targeted ESG characteristics
2. Our ACT funds which are designed to create
long-term sustainable value for clients whiledriving meaningful change for society and theenvironment. As of the end of December 2023
this includes 25 funds and two ETFs, each
investing with focus on Planet or People, orPeople and Planet. Within ‘Planet’ we manage
portfolios focused on decarbonisation (e.g.
carbon transition fixed income) as well as
portfolios investing in client solutions (e.g.
dedicated biodiversity equity).
3. A range of equity and credit Paris Aligned
Benchmark (PAB) ETFs launched in 2023 tocater to clients who wish to achieve theirgoals using the PAB framework within an
ETF wrapper.

Based on the second version of the Label ISR rulebook, as of end 2023.

AXA IM Stewardship Report 2023 5

ESG Integration into platforms

AXA IM Core
EquityBeside ESG qualitative analysis, a
dedicated team of analysts conducts
impact analysis on companies according
to a five-pillar proprietary framework.
As a member of the advisory committeeof the Global Impact Investing Network(GIIN), we contributed to the Guidancefor Pursuing Impact in Listed Equities
published in March 2023. Our impact
investment analysts use our proprietaryimpact research framework to assess
the contributions of companies toenvironmental and/or social objectives
and the UN SDGs. This framework isbased on five pillars which are specific
to impact investing and is used in our
impact funds to identify companies
contributing to funds’ predefinedtargeted impact objectives.
Through our research, we seek to
identify ‘Impact Leaders’ – the highestrated companies in terms of delivering
positive societal impact. We typicallyfocus on companies selling criticallyimportant goods and services andwhich generate significant additionality
by leveraging technology, scale orinnovation to make goods and services
accessible and commercially viable inpotentially underserved markets. We
believe our in-depth impact research,when integrated into our traditional
company and financial analysis, is a
powerful tool to identify potential longterm winners.

6 AXA IM Stewardship Report 2023

Case Study – Social progress investment strategy
AXA IM's social progress strategy isbased on an impact investing approachthat aims to have a direct and positiveeffect on society while contributing to amore sustainable future. This strategy
invests in publicly listed companies
addressing a range of social needs – andwhich demonstrate a strong impact andclear alignment with social UN SDGs.
Investment areas include affordable
housing, financial inclusion, access tohealthcare solutions, nutrition, safety,
education and entrepreneurship.
To define the investment universe, AXA IM
applies a socially responsible investment
selectivity approach, along with aqualitative impact framework to evaluate
the alignment of company activities to
UN SDGs and quantify their impact onsocial issues. To comply with the French

Engagement and voting

We conduct thematic projects aimed at
supporting companies to reduce their
negative externalities, to deliver positive
impact and improve impact-related
disclosures. We conduct engagementwith issuers and track progress –achieving effective change can taketime, and we define a timeframe which

ISR label’s updated guidelines, the fundcommits to outperform its benchmark on
two key performance indicators – carbon
intensity and water intensity. The fundalso applies additional exclusions on
unconventional and conventional oil andgas, power generation, coal, tobacco,and weapons to comply with the QS 2021
Towards Sustainability label.
By adding environmental objectives
to this social-focused strategy, AXA IM
ensures the social objective does notcome at the expense of environmental
performance. Using an unconstrained,
multi-cap strategy, the aim is to invest in
publicly-listed companies in developedand emerging markets offering highgrowth potential and that focus onproviding services across a range ofsocial needs.

we consider reasonable for achieving
these objectives, depending on thenature of the change we are targetingand the underlying concerns. These also
differ according to country, issuer andrelevant thematic area. These thematic
engagement projects mainly aim tosupport our equity strategies within the
ACT range in delivering more impact.

AXA IM CoreEngagement status

Case Study – Regeneron Pharmaceuticals

Company responds

Engagement approach: Engagement with objective
Engager:Core ESG and Impact Research

In 2023, we began a sustainability dialogue
with Regeneron Pharmaceuticals, a USbased biotechnology company providing
antibody and protein-based therapeutics
to help patients with life-threatening,
infectious, and rare diseases. In our firstmeeting with Regeneron, we covered
the company's pricing policies, access to
medicine initiatives and impact-related
KPIs.
Regeneron expressed a commitment
to a value-based approach inpricing new medicines, considering
long-term investment and risks

inherent in scientific innovation. In
this context, the company stressed
its commitment not to increase
the price of its top-selling product,
Eylea, notwithstanding the ongoing
substantial research and development
investments to support approval
for additional medical conditions.
We also discussed Regeneron’scompassionate use programmes forearly patient access to make certain
medicines available to eligible
patients before they are commerciallyavailable, as well as other financial
assistance initiatives. In terms ofimpact related KPIs, Regeneron
confirmed its continuous monitoringand estimation of the number ofpatients impacted by its products,
building on conservative estimatesfrom 2022 and aligning with its
commitment to enhance transparency
and accountability in this aspect.
Overall, we appreciated thecompany's responsiveness andcommitment to ongoing discussions.
We plan to monitor significant
developments for future engagement
opportunities.

AXA IM Stewardship Report 2023 7

8 AXA IM Stewardship Report 2023

AXA IM Core
Fixed income
Corporate ESG analysis
In AXA IM's credit process, analysts use
a qualitative ESG template to assign aview on company management andmomentum around ESG issues. Credit
analysts highlight ESG strengths andconcerns, ESG KPIs and governancestructure, with the key ESG topics, risks
and KPIs highlighted at the discretion of
the analyst, allowing them to select topics
most relevant to the issuer. AXA IM uses aframework to assess the transition planof investee companies in line with our
net zero commitment. The framework
leverages quantitative information fromthird-party sources and qualitative analysis
to confirm the credibility of the strategies.
The credit research team reviews past
decarbonisation performance, forwardlooking measures, and capital allocationin the context of sectoral and geographicalcharacteristics to identify leaders and those
lagging in achieving net zero.

Case Study - Climate colours engagements
Our US credit team annually defines
a focus list of companies, prioritising
issuers designated ‘red’ or ‘orange’
by our proprietary climate colours
framework as described in our TCFDArticle 29 Report. They accounted for

NOT COVERED/NO DATA

CLIMATE LAGGARDS▶ Qual: coveredby analysts▶ Quant: Cl available

42% of engagements (including both‘Engagement with Objective’ and‘Sustainability Dialogue’) conductedby the US credit team over the courseof 2023. When looking specificallyat Engagement with Objective,

EXPLICIT
NET ZERO (NZ)
INTENTION▶ Qual: corporate NZ
communication▶ Quant: CO2 targets(MSCI) TPI ≥1, NZ
membership

CREDIBLE TARGETS &NET ZERO ENABLERS▶ Qual: capex and NZ
business plan + a few
transition enablers▶ Quant: TPI≥3 SBTi
committed SDG-7/13= 10

engagements with ‘red’ or ‘orange’
accounted for 60%.

ON TRACK/RESULTS▶ Qual: analysts
challenging SBTi anddeep-dive in material
scope 3▶ Quant: SBTi validated,
TPI=4, CI currently
below/close
to sector pathway, CI
reducing at NZ pace

AT NET ZERO▶ Quant: CI currently
consistent with 2050
sector target

Source: AXA IM climate colouring system, based on PAII Net Zero Investment Framework, 2021.
CI = carbon intensity; TPI = Transition Pathway Initiative. For illustrative purposes only.

AXA IM Stewardship Report 2023 9

ESG Integration into platforms

AXA IM Core
Fixed income
Sovereign ESG analysis
Analysts and portfolio managers haveaccess to sovereign ESG scores and
ESG-related KPIs in their front officetool as a complement to traditional
macroeconomic country analysis.
We believe a full assessment of each
ESG pillar is necessary to understandthe impact of ESG factors on longterm economic sustainability. For
sovereigns, among key ESG topics,
we have particularly targeted CO2
emissions, energy use, renewable energy
consumption and the water exploitationindex score.42
Discussions also take place withsovereign issuers on ESG topics during
regular meetings with Treasuries,
agencies, central banks and othergovernment ministries as well as during
the process of green and social bondissuance. All offer an opportunity todelve into sovereigns’ public spending
programmes around sustainability andto better understand a country’s ESG
risks. In 2023, we had 17 engagement
discussions with 15 quasi-sovereigns,
governments, agencies andsupranational issuers.

Green, social and sustainability
bonds engagement

Engagement with bond issuers is an
important aspect of our active ownership,
as we are long-term investors and often
hold bonds to maturity. Engaging on
ESG issues is a critical way to ensure wemanage the value of our bond investments
over time.

Our engagement goals andactivity

We met with 98 GSSB issuers in
2023. Beyond alignment with therecommendations of the International
Capital Market Association’s Green Bond

42

Case Study - Japan's Government
Engagement approach:
Sustainability Dialogue
Engager: Core Sustainability Analysts

We met with Japan’s Government todiscuss transition financing because of
its push to fund a green transformation
through a specifically-labelled bond. We
provided feedback on its plan to label thebond as a transition bond although there
are components of green. For example,
a portion would fund renewable energy
which is considered a green activity andnot a transition activity. We affirmed that
this was in line with our expectations as we
do not want activities financed by a green
bond that are not actually green included,
while we find it acceptable to include
greener activities within a transition bond.
We also clarified that we support theuse of the label ‘transition bond’ inthe market, contrary to other actors
who prefer only a green label that
accommodates a spectrum of activities,some of which can be brown – which we
believe may engender issues of credibility
and greenwashing. We reiterated
our willingness to invest across the
spectrum of the low-carbon transition
once projects are labelled accordingly.
We discussed with the issuer our vision
for what transition means, highlighting

Principles, our main area of focus wasto discuss GSSB alignment with issuers’
sustainability strategies and forwardlooking ambitions.
We have seen some positive outcomes.
More and more issuers establishedconcrete ESG objectives and disclosed itwithin GSSB frameworks. On the other
hand, given our higher expectations,that any transition financing instrument
needs to exemplify an ambitious
sectorial decarbonisation pathway using
best available technologies and should
not engender lock-in of carbon intensive
assets in the economy.
We would expect transition instruments
to fund projects that deliver significant
efficiency gains. We also mentioned our
openness for frameworks to be broad
by including categories or projects forwhich technologies are not yet widely
scalable as it leaves room for flexibility.
However, we also highlighted that as
new technologies become available forthe sector, frameworks and transition
plans should be updated accordingly torepresent a decarbonisation pathway
using best available methods. We
suggested any limitations should behighlighted in the issuer’s roadshow
materials, framework or reporting.
This was a very positive discussion
with the Japanese Government, which
took our feedback and expectations
into consideration when finalising its
sovereign transition bond framework.
We also participated in a seminar during
COP28 along with representatives of
the Japanese Government, to share ourviews on the role of sovereign bonds intransition financing.

poor ESG profiles and ambitions atcertain issuers were a significant factor
in our deciding that some GSSB issuance
was not eligible under our definition in2023.
Another key topic of discussion withGSSB issuers in 2023 was around theinclusion of the EU Taxonomy and of theupcoming EU green bond standard in

The European Environment Agency’s water exploitation index measures the mean annual total demand for freshwater divided by the long-term average
freshwater resources.

10 AXA IM Stewardship Report 2023

AXA IM Core
Fixed income
market practices.43 While it is still too earlyin our view to expect all issuers to align withthese new requirements, we neverthelesshave seen positive developments on
this front. Issuers like French utility
Suez, France’s postal service La Poste,
the European Investment Bank and theRepublic of Austria have all included the EU
Taxonomy technical criteria in their green
bond frameworks.
In 2023, we developed our assessment
framework for Sustainability-Linked Bonds(SLB). This market is still nascent, but we
had the occasion to share our views andexpectations with some SLB issuers as wellas other market stakeholders. We met with
12 SLB issuers in 2023, which allowed us tobetter identify good practices and clarify
our expectations with this market.

Bondholder meetings
In 2023, AXA IM voted at five GSSB
bondholder meetings, on 11 resolutions.
One of them was related to areclassification of a conventional bond to agreen or social bond.
Bondholder meetings allow the issuer
to submit to a vote any question related
to the bond. These may include routine
resolutions requesting additional
documents, but also the increasingly
frequent case of reclassification of aconventional bond as a green, sustainable
or social bond.
Any vote on the reclassification of aconventional bond will be decided incollaboration with the ESG fixed income
analyst, who will review the proposal (via
the bond's framework) and give an opinion.

Case Study - Green bonds issuers engagements
In 2023, we started an engagement
programme with existing green bondissuers that appear to be lagging interms of their environmental and climate
policies and strategies – notably withregards to our increasing expectations in
those areas to ensure consistency withgreen bond issuances.
We identified six banks that are frequent
green bond issuers and sent them eacha letter requesting engagement andstrengthening of their coal/climate
financing policies:• Mitsubishi UFJ Financial Group (MUFG)• Bank of China (BoC)• Sumitomo Mitsui Financial Group(SMBC)• Agricultural Bank of China (ABC)• Industrial & Commercial Bank of China(ICBC)• China Construction Bank (CCB)
The outcomes of this engagement
programme were mixed. The Japanesebanks MUFG and SMBC responded

to our letter, and we had direct andinsightful discussion with SMBC. Bothseems open to dialogue and willing toprogress – particularly on SMBC’s side.
On the other hand, their Chinese peers’
response was mostly disappointing in
our view, except for ABC. We had anin-person meeting with ABC and eventhough we did not feel the company
had a strong alignment with our
expectations, at least dialogue was
opened.
While we contacted BoC, ICBC and CCB
several times via letter and throughother channels such as investor relations
and underwriting banks, we did notreceive a response to our engagement
request. As a result, we considered thisas failed engagement and downgraded
our opinion on their green bonds tonegative. We will continue engagementwith the remaining banks and may
adjust our opinion on their green bonds
depending on their future progress on
our requests.

Outlook for 2024
In 2024, we will continue work on
GSSBs and engage with issuers toensure compliance with eligibility
criteria. The same discussions will be
had with SLB issuers and opportunities
to influence the development of
the market and framework will be
reviewed. In fixed income markets, weplan to review escalation techniques
specific to large fixed income investors
and monitor the use of the EU
Taxonomy in the issuance of green andsustainability-linked bonds. This work
will also support our participation to
EU Platform on Sustainable Financework.

AXA IM has been involved in discussions
with other parties (investors, banks andissuers) in accordance with the Green Bond
Principles, since the end of 2022. We willcontinue to pursue this in 2024 in order todefine best practices.
43

The EU Taxonomy is a European Union regulation. It is effectively a list of business activities which companies and investors can legitimately claim are‘climate friendly’. Ultimately, this should allow investors to make more informed and consistent comparisons between companies, based on the shareof Taxonomy-aligned activity in their day-to-day operations.
AXA IM Stewardship Report 2023 11

ESG Integration into platforms

AXA IM Core
Fixed income

Case Study - Green bonds investment strategy
The launch of our global green bonds strategy
in 2015 reflected AXA IM’s commitment to help
contain climate change and support the growthof the green bonds market. This was reinforced
in 2022 with the launch of a new green bonds
strategy with a specific focus on emerging markets
and high-yield companies and the objective togenerate a measurable environmental impact inthese areas.
We have sought to build a robust eligibility
framework to ensure the new strategy is entirely
focused on green bonds that can potentially offer
the same returns as a comparable conventional44bond, with the added benefit of enabling projects
with environmental benefits in a transparent
manner. The green bond market has grown
sharply over recent years, and now offers morediversification in terms of asset classes, regions
and issuers.
A universal green bond definition is still in themaking, but several standards are being put
forward by major market actors.
The new global green bonds strategy was awarded
with the French sustainability label Greenfin and
the Belgian ‘Towards Sustainability’ label.44

Green, Social and Sustainability Bonds: An update on our assessment framework, AXA IM, September 2022

12 AXA IM Stewardship Report 2023

AXA IM Core
Multi Asset

Case Study - Multi asset optimal impact investment strategy
Within our Multi Asset Optimal Income
range, we manage an ‘Impact’ strategy
which is part of our ACT range and focuseson the theme of prosperity for people andprosperity for the planet, aligned with
relevant UN SDGs.
As a global multi-asset impact strategy,
it seeks to invest in businesses that focus
on providing products or services and/or
finance projects which have demonstrated
a strong positive impact on social andenvironmental factors, in addition to aclear alignment with the SDGs.
With regards to universe construction,
the strategy can invest in equities and45

in debt securities, notably GSSBs. The
investment process relies on two robust
impact proprietary frameworks tobuild the equity impact universe. Theseframeworks aim to assess the eligibility of
GSSBs while identifying and monitoring
the sustainability and SDG-alignment ofcompanies.
On top of AXA IM’s RI sectorial andnormative exclusions, the fund applies
additional exclusions on unconventionaland conventional oil and gas, power
generation, coal, tobacco and weapons tocomply with the Towards Sustainability
label. 45

Making sustainability in finance the norm, Towards Sustainability, retrieved February 2023
AXA IM Stewardship Report 2023 13

ESG Integration into platforms

AXA IM Core
Multi Asset

Case Study - Sanlam
Engagement approach:Engagement with objective
Engager: Core ESG and Impact Researchh

Sanlam is a pan-African financial services groupbased in South Africa that specialises in life andgeneral insurance, financial planning, retirement,
investments, and wealth management. In 2022,
Sanlam reported it had 50 million customers across
31 countries. The majority of its earnings, at 75%,
are generated in South Africa.
Insurance companies are key to a sustainablefinancial system due to their role as a risk manager,risk carrier and investor. Access to affordable
insurance is vital for low-income people and micro,
small and medium sized enterprises (MSME) as
an alternative to informal coping mechanisms,
helping them build resilience against economic,
social and environmental shocks. African countries
are arguably the most exposed to the risks
and devastating effects of climate change andeconomic uncertainty – and yet, they are the least
protected by insurance instruments.
Sanlam makes positive contributions to SDG 8.10
and SDG 10.2, providing insurance products inunderserved markets and promoting financial

14 AXA IM Stewardship Report 2023

and economic inclusion in Africa. The company's
partnerships with Capitec, MTN, and ShriramGroup have helped bring affordable insurance
and microinsurance products to underserved
customers. ESG integration in investment activities
is evidenced by the adoption of a responsible
investment policy, engagement efforts withinvestee companies, and the creation of ESG and
impact-focused funds.
ESG reporting practices are adequate, although wewould appreciate additional disclosures related
to the social impact of products, as well as aninventory of scope 3 emissions. Sanlam is exposed
to carbon-intensive sectors, but the company
is committed to gradually reducing the carbon
intensity of loan and investment portfolios.
We met with Sanlam to discuss initiatives forfinancial inclusion, development of sustainable
insurance and investment products, exposure
to carbon-intensive sectors, and ESG integration
in investment activities. While the company
demonstrates a commitment to positive impact
and responsible investment practices, we
encouraged the disclosure of impact metrics andfinanced emissions. We also recommended thecompany establishes clear objectives and monitors
progress towards these goals on an annual basis.

AXA IM Alts

Responsible investment sits at the core of
AXA IM Real Assets’ approach to business.
We actively consider financial and nonfinancial criteria during our investment
process – from origination of opportunities
to the investment assessment and decisionmaking process at acquisition, and throughto our active ownership of investments.
This integrated approach is fundamental to
the good stewardship of our investments.
By making specific non-financial
considerations part of our investment
processes, we believe we can ensure
better visibility of sustainability-relatedrisks and potential adverse impacts on ourinvestments. This visibility should provide
us with a broader perspective on asset andsector-specific risks which then informs
our underwriting and asset selection.
Ultimately, it also helps to shape our viewon investment risk, returns and liquidity,

and we believe it also enables our teams tobetter identify and unlock opportunities toenhance value for clients.
The integration of the assessment ofsustainability risk at investment level andthe application of group-wide sectorial
exclusions and ESG-scoring methodologies
can help us to address the most material
sustainability risks at the time of an
acquisition. From this position, we see
an important opportunity to improve theperformance of our investments throughactive management, stewardship andengagement. The goal is to amplify the
impact we can generate through ourinvestments while continuing to generate
sustainable long-term returns for ourclients.
Beyond meeting reporting obligations
under new and upcoming regulatory

requirements, AXA IM – alongside ourparent AXA Group – is committed tosupporting the goal of net zero as amember of the Net Zero Asset Managers
initiative. This means working with ourclients and partners to target net zerocarbon emissions from our investment
platforms by 2050, or before.
We acknowledge the scale of thischallenge and recognise that success will
only come through active collaborationand partnership. Accordingly, through2021 we undertook a series of structured
discussions across our investment
platforms to encourage companies,
borrowers and tenants to consider anddisclose their environmental strategy andperformance. These efforts were pursued
in 2022 with additional questions onenvironmental strategies and performance
progress.

AXA IM Stewardship Report 2023 15

ESG Integration into platforms

AXA IM Alts
Real Estate Equity
As users of the assets, the tenants of thebuildings under management are key
contributors in achieving the objectivesof the ESG strategy. We actively engage
with them, convinced that cooperation
with tenants is a necessary condition

for the implementation of relevant andeffective measures over the long term. It
has been demonstrated that the properuse of a building's facilities is a key factor
in reducing its environmental impact. For

this reason, it is essential to be proactive
in supporting tenants to make good useof building facilities and to provide themwith recommendations and good practices
to implement.

Our tenant engagement efforts are focused around three core areas:
LEARNING

MONITORING

Educating our tenants on ESG to
influence behavior and improve
buy inTENANT ESG
TRAINING

FIT-OUTGUIDE

ESGGUIDESESG
EVENTSGREEN LEASEINTEGRATIONSHARING
CONSUMPTION DATAWITH TENANTS

Maintaining a dialogue with our
tenants to understand their present
and future needs

TENANTSURVEYFEEDBACKSESSION WITHTENANTS

Learning

We distribute ESG guides to the tenantsof our assets to educate and increaseawareness of ESG issues and the specificfeatures of our assets related to ESG. Forcommercial tenants we provide fit-out
guides to aid in mindful procurement.
Through our ESG Rating we track thenumber of assets for which such tools are
already deployed.

Monitoring
We integrate an ESG clause (green lease)as standard to new contracts or contract
renewal to maximise the sharing of46

Collecting data on the asset andleveraging it to create targeted
solutions

LIAISING

consumption data from tenants and agree
on ESG targets and monitoring for thebuilding. We encourage the feedback ofconsumption data to tenants to further the
discussion of targeted solutions.

Liaising
We perform annual tenant satisfaction
surveys (see case study) to collectfeedback from our tenants on their user
experience and level of satisfaction.
Between 2021 and 2022, 435 assets
were included in such an initiativeacross Europe (excluding Switzerland),corresponding to €36bn of assets undermanagement - circa 95% of assets undermanagement in scope. We also promote
the deployment of an annual ESG
Committee, which is a meeting dedicatedto ESG between the asset manager, theproperty manager and the tenant. In
2022, 50% of assets under management in
scope report they have carried out an ESG
Committee with at least one tenant.46
We continually work to increase ourcoverage and further internal and external
integration of ESG by disseminating
ESG training throughout our chain of
stakeholders, from property managers tointernal asset managers.

AUM in scope exclude assets under development, platforms and assets out of scope such as forest, parking, plot of land and unit cells

16 AXA IM Stewardship Report 2023

AXA IM Alts
Real Estate Equity
Commercial real estate debt

For our Commercial Real Estate (CRE)
Debt platform, we sought to actively
improve the level of data visibility on
underlying assets to better inform ourview of environmental risks. Historically,
access to such data in private orsecondary markets has been poor, which
has hampered visibility of the efficiency
or underlying ESG performance of assets.
We undertook a two-step approach to
improve this.
First, we engaged with a third-party data
provider to assist with the assessment ofcarbon emissions, based on estimatedemissions per square meter for different
asset types in different countries. This
enabled us to generate an estimatedcarbon footprint for the portfolio. The
natural limitations of this dataset werethen addressed by including a second
step which involved structural dialogue
with our borrowers via a survey tocollect various ESG information and KPIs
including energy consumption.
2023 marks the third year in row where
the annual survey has been circulated.
The survey was sent out to over 40
borrowers, representing 58 loans valuedat €9bn. We received a 90% response
rate, representing some €8bn assets
under management as of 31 December
2023, which is a 42% year-on-yearincrease.
Information shared since 2021 has, forexample, helped us develop a deeper
level of insight into carbon and energy
efficiency-related risk in our portfolios,
in addition to our growing knowledge
base of physical and transitional risk.
The information will further informrefinancing opportunities and our ability
to work more closely with borrowers andunderlying assets in our journey towards
net zero before 2050.

Case Study
In 2021 we undertook the first EU-wide
tenant satisfaction survey project tobetter understand the current needs
and future expectations of the tenants
within our assets. Tenants are sent a
set of questions, through their property
manager, which assess tenants’satisfaction regarding their relationshipwith the property manager and ESG
topics. The scope is determined throughconsideration of several factors including
asset class, level of operational control,
and future investment plan.
Our target is to cover 100% assets undermanagement in scope on a three-year
rolling basis. Between 2021 and 2022, 435
assets were included in such an initiativeacross Europe (excluding Switzerland),corresponding to €36bn of assets undermanagement (circa 95% of AUM in
scope).
The aim of the survey is to establish an
ongoing dialogue with our tenants bymonitoring their views and integrating
their feedback into our asset level
actions plans. The output of the survey
is considered in the ESG strategy of theasset and the wider portfolio.

The survey is sent out by property
managers to tenants during the second
half of the year with the survey closing
to new respondents in November. In
December the property managers sharean analysis of survey responses, in linewith metrics provided by the Global Real
Assets ESG team. Using these results
AXA IM works in collaboration with ourproperty managers to identify areas of
future focus within ESG.
The survey questions were composed by
the Real Assets Responsible Investment
team, in line with requirements frommarkets standards e.g., Global Real
Estate Sustainability Benchmark (GRESB)
and certification schemes, as well asinternal metrics for property manager
performance. In 2022, this process wasrefreshed, with the questions asked
reduced to five from 10, to ease theprocess and ensure more accurate
feedback. The questions covered
satisfaction with the relationship with the
manager, the quality of services provided
and comfort levels, as well as focusing
specifically on ESG communication.
Feedback sessions were organised for the
beginning of 2023.

AXA IM Stewardship Report 2023 17

ESG Integration into platforms

AXA IM Alts
Listed Real Estate
sector as their reason for not submitting
to the GRESB survey. These firms
indicated their intention to submit
pending modifications by the reporting
entitySince 2021, we have been conducting
an annual survey as part of the active
stewardship of our listed real estate
investment platform.
The survey was sent to over 70
companies within the European listed
real estate universe to gain a better
understanding of their qualitativeand quantitative metrics associatedwith their ESG practices (including
biodiversity and social risk) andperformance. We are still collating thedata from the 2023 survey. Nonetheless,the results for 2022 survey are as
follows.

Carbon Risk Real Estate Monitor (CRREM)• 31% of the respondents reported use of
the CRREM tool, with some companies(e.g. Gecina, Segro) stating the current
set-up of the tool is not line with specificasset types
Physical risk
• 77% of the respondents declared they
undertook a portfolio level assessmentof physical risk. 15% of companies thatmonitor physical risk use MSCI's Climate
Value at Risk tool

GRESB
• Of the respondent companies 73% arecurrently submitting to the GRESB.
Several respondents recognised thecurrent and future significance of
GRESB in the market but cited its
limitations in assessing the residential• 92% of firms had determined carbon
reduction targets. 2030, 2040 and
2050 were common timeframes for

92%

100%
80%

ESG targets

92%
85%

77%

73%

62%

60%
40%

31%

20%
0%
GRESB Submission

Use CRREM

MonitorHave Carbon
Physical Risk Reduction Targets

Source: AXA IM Alts, Company data as at 24/11/2023.

18 AXA IM Stewardship Report 2023

Have Building
Monitor
Certification Biodiversity Risk

MonitorSocial Risk

carbon reduction, with several firms
specifying the breakdown between
scope 1 and 2, and scope 3 emissions.

Certifications• 92% of respondents reported havingsome portion of their portfolio having
a certification. However, firms citeda range of certifications – BREEAM;
Haute Qualité Environnementale(HQE); and Leadership in Energy
and Environmental Design (LEED);
though there was a lack of consensus
across the firms surveyed in terms ofscope (partial versus whole building
coverage). Furthermore, companies
used different metrics (percentage oflettable area, number of buildings,
percentage of revenues)

Energy performance• All respondents declared that noneof their investments in real estate
assets were involved in the extraction,
storage, transport, or manufactureof fossil fuels. However, 8% of
respondents reported that a few of
their residential tenants were utilising
gas heating• With regards to identifying inefficient
real estate assets, there was a notedlack of consensus of the definitionof an efficient asset (emphasising
the need for pan-EU consensus on
Energy Performance Certificate
levels). Companies reported disparate
readings with regards to exposure toenergy-inefficient real estate assets.
Shurgard had the lowest exposure at
15% with Icade having the highest at
89%

AXA IM Alts
Natural Capital and Impact Investments
The AXA IM Impact Investing strategy
targets the delivery of market ratefinancial returns alongside the generationof positive, intentional, and measurable
impact returns. Our guiding mission isto address the needs and aspirationsof underserved people globally while
protecting the natural environment andcontributing materially and directly to the
UN SDGs and targets that are relevant toour strategy.

ESG issues and identify areas where
improvements are needed.
The ESG assessment framework is
systematically applied to all ourinvestments. Where we identified
areas of improvement, we develop
Environmental and Social Action Plans(ESAP) in collaboration with investees,detailing actions to be undertaken in
relation to environmental and social
issues identified as part of investment
monitoring activities. The ESAP includes
responsibilities and timelines within whichcorrective action needs to be undertaken.
We actively monitor implementation ofaction plans and overall ESG performancethroughout our investment tenure.

Using alternative assets – private equity,
venture capital, private debt, real assets
and project finance – we invest in a broad
range of impact themes that aim to deliveron our clients’ financial and impact
objectives.
We believe the proper management of
ESG issues is critical to the long-termsustainability of businesses, and assuch, the consideration, integration,
and active stewardship of ESG issues isa fundamental part of our investment
process.
We have developed a framework for the
management of ESG issues that takes
account of the alignment of prospective
investments with applicable AXA IM RI
policies, ESG regulations, standards
and norms such as the International
Finance Corporation’s Environmental
and Social Performance Standards,
the Environmental, Health and Safety
Guidelines of the World Bank and theInternational Labour Organization. This
assessment framework is applied toinvestments during due diligence and over
the tenure of our investments.
Our ESG assessment framework covers acomprehensive list of potential adverse
impacts in line with emerging regulations.
Our assessment framework takes accountof a range of ESG issues including climate
risks; biodiversity; pollution; health andsafety; human rights; and governanceconcerns, amongst others. The ESG
assessment framework is used to assess
investees’ performance on material

Case Study - Climate action engagements
In 2023, we adopted climate action
as our engagement theme for our
Natural Capital and Impact Investment
business line with a view to fostering
the greater engagement of small to
medium enterprises in the fight against
climate change, influencing them totake action to reduce their operational
greenhouse gas emissions.
First, we conducted a survey to build
a baseline understanding of how
our investees measure, manage andmonitor emissions across various
emissions scopes – scope 1, 2 and 3.
Our findings showed differing levelsof understanding and challenges.
While some investees are relatively
advanced – and had measured
their footprints credibly – and were
establishing SBTi related targets,others are relatively nascent in theirclimate action plans.

The biggest challenge faced by investees
was around the measurement andmanagement of scope 3 greenhouse gas
emissions.
Based on those first insights, in linewith our active ownership approachand our stewardship responsibilities,
we appointed a consultant at the endof 2023 to support our investees intheir journey towards climate action.
The consultant’s remit includes themeasurement of emissions, defining
reduction strategies and providing
opportunities to offset residual
emissions through carbon offsets.
We trust this approach will enhanceknowledge, accuracy and build a
credible baseline for climate action by
our investees. We will share the resultsof this thematic engagement in future
Stewardship Reports.

AXA IM Stewardship Report 2023 19

ESG Integration into platforms

AXA IM Alts
Alternative credit
On the direct investment side (leverageloans and private debt), teams
constantly engage with companies,
sponsors, and banks with respect
to deal analysis and ongoing credit
monitoring on a regular basis. The
engagement activity is realised throughan ESG questionnaire for companies andarranging banks, which is completed
during the syndication period. In
addition, for each new primary issuancethe credit analysts meet company
management. We have consistently
promoted ESG considerations with thearranging banks and sponsors overrecent years and believe we have beenat the forefront of driving ESG in theleveraged loans market.
In summary, we:• Seek to understand the ESG issues
that impact companies in which weare invested• Evaluate a company’s policies andpractices in relation to relevant issues• Encourage companies to align withbest practice on ESG issues• Engage in constructive dialogue wherea company’s approach or practices
on ESG matters is below investor
expectations• Leverage our clients’ investor rights
to push for desired outcomes frominvestee companies• Align our votes at general meetings
with our engagement objectives

On the secured finance side, we aim toleverage our size as one of the largest
European investors in collateralised
loan obligations (CLOs) to promote

20 AXA IM Stewardship Report 2023

responsible investment practices. We
aim to typically direct CLO managers
towards higher standards in terms of
ESG, both in their day-to-day corporate
management as well as in theirinvestment philosophy.
AXA IM only invests with CLO managers
that respect minimal ESG guidelines(such as being signatory of a responsible
investment international standard likeUN PRI, having a carbon footprint
reduction plan, an inclusion
programme and exclusion policies).
Engagement with compliant CLO
issuers mainly occurs pre-investment.
When necessary, we will continue thedialogue to clarify our expectations
and support them in reaching those,for example by pushing laggards torespect ESG standards (such as tobecome signatory of UN PRI).

AXA IM Prime
Overview
AXA IM Prime is a fully integrated
provider of investment solutions acrossprivate markets, including private
equity, private debt, infrastructureand hedge funds, embracing a diverse
range of strategies across primaries,
secondaries and co-investments.
AXA IM Prime was established in 2022
and operates within AXA Investment
Managers.

ESG scores computed as part of the preinvestment ESG due diligence phase• Structured dialogue also takes placewith investees to ensure compliancewith AXA IM Prime’s ESG integration
approach and clauses. This means
assessing positioning against regulatory
requirements, ESG innovation andtrends, discussing ESG data reporting
expectations at entity and portfolio
levels, and identifying investment
opportunities
In 2024, AXA IM Prime will continue
to deploy its ESG strategy and further
develop the engagement framework
including monitoring and reporting.

During 2023, AXA IM Prime developed
an ESG integration strategy covering all
stages of the investment cycle (preinvestment, investment/holding phase,and exit.)
Pre-investment, AXA IM Prime has athreefold ESG due diligence process
built around compliance withAXA Group and IM sectorial exclusion
policies, minimum ESG criteria, and an
ESG score of targets’ capabilities bothat manager and portfolio levels. This
assessment enables the identificationof Key Improvement Areas which the
ESG team will leverage to engage withthe managers.
During the investment/holding phase,
AXA IM Prime aims to use this stage ofthe investment cycle as an important
opportunity for dialogue with its thirdparty general partners and managers.
Therefore, we have put in place astructured approach to ESG monitoringand engagement, with the aim ofcontributing to risk management andsustainable value creation during theownership/holding phase:• Monitoring and engagement activities
are carried out directly by theinvestment team in collaboration
with the ESG team as required,including as part of annual meetings
with investees to monitor and update

AXA IM Stewardship Report 2023 21

Disclaimer
Investment involves risks, including the loss of capital.
Companies shown are for illustrative purposes only. It does not constitute investment research or financial analysis relating to transactions in financial
instruments, nor does it constitute 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 personalized recommendation to buy or sell securities.
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments
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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.
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