AXA IM, Sarasin to expand sustainability programmes
EUROPE - AXA Investment Managers (AXA IM) plans to take environmental, social and governance (ESG) to the next level by continuing to integrate it in its mainstream products, on top of additions to its six responsible (RI) investment labelled products.
The integration into the mainstream will be undertaken through expanded data provisioning on the ESG side.
The carbon footprint and water usage of companies are, along with one or two other metrics, one of the reporting tools to be used for the integration.
Proactive engagement with companies in AXA IM's mainstream products is also planned, according to Matt Christensen, global head of responsible investment at AXA IM.
He told IPE: "Based on the fundamental research of our ESG team, we can roll ESG out across all asset classes and put it into a reporting system.
"But most important is to tackle classic engagement in our mainstream portfolios - it is essentially about being an active shareholder.
"In the RI funds, such as our human capital fund, we are also improving our ESG criteria. The more ESG is embedded into an RI fund, the more it becomes about impact investing."
Christensen said, within the next few years, he aims for ESG to become an opt-out approach in contrast to its current opt-in status.
But he believes there will always be the need for RI-labelled and mainstream products.
"Thematic investments are now trickling into other areas," he said. "The diversity of boards is also moving into the mainstream area. We will always have this evolution, and, therefore, we will always need to have RI to perform the avant-garde ESG research."
Due to tensions developing around the current social fabric, the focus of ESG in the near-term future will be on social issues such as unemployment.
According to Christensen, these issues have often been the trickiest to implement in the ESG space.
ESG in emerging markets - such as family holdings and their connection to the state and human rights - is also set to become crucial to investors, he said.
Christensen is also involved in ESG work related to the parent company, AXA Group. In 2011, AXA Group created an RI committee to discuss ESG issues relevant for both the product mix and investment decisions and to determine company-wide exclusions such as cluster bombs and bio-chemical weapons.
Christensen sits on this committee as the AXA IM representative, alongside CIOs of different AXA entities.
AXA IM has been developing its RI Inside strategy - which aims to integrate ESG criteria into all of its platforms' investment decisions and processes and market innovative RI products - since 2005. Paris-based Christensen started at AXA IM in May.
Swiss asset manager Sarasin has also been rolling out its sustainability programme across its entire portfolio since January.
This means the asset manager no longer has any unconstrained, unfiltered strategies - they are either classed as sustainable or responsible.
Andreas Knörzer, managing director and head if asset management, told IPE: "As some clients give us a benchmark, hardcore socially responsible investment (SRI) would not work in every portfolio.
"But, by including sustainability risk as one criterion we look at in even our conventional funds, the non-hardcore sustainable investors are now able to benefit from our research and rating in this area too. [It] can identify certain events even in our conventional strategies."
In 2008, Sarasin took the decision not to advise on private equity and hedge funds. It runs, however, a commodity fund split equally into energy, agriculture and metals futures backed by sustainable, liquid bonds, as it finds, due to the underlying demand, commodities are an attractive investment.
Knörzer said: "Our offering is closest to what the UN Principles for Responsible Investment (PRI) call best practice. We do not chase the price of one or two commodities. Every time they outperform and their price rises, we become a seller. In other words, we are not a trend follower."
Sarasin's SRI funds pride themselves in not having invested in Lehman Brothers, BP or Greek, Spanish or Italian bonds.
But Knörzer admits that the speed at which things change has accelerated, which means more frequent reviews are necessary.
Doing a country review every 4-5 years is no longer good enough - instead, the asset manager has to review key criteria every year and needs to include how the resources that a country has are transferred in welfare.
Sarasin previously made all of its private investment offerings sustainable. Prior to December 2008, private investors had to opt in to apply sustainable strategies, but since then, any investor not wanting to invest sustainably has had to opt out.