esg integration and sustainable bond market

ESG integration and Sustainable bond marketAXA Investment Managers

June 2021

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ESG Integration

• AXA IM - RESTRICTED

AXA IM Core, a global leader in responsible investingESG is fully integrated across our investment processes and embedded within our organisation

RI: Responsible Investment*Source: AXA IM as of 31/12/2020. Non audited figuresSome resources are shared by the entire AXA IM Organization. There is no assurance that any particular individual will be involved in the management of the portfolio for any given period of time, if at all. We do not guarantee the fact that staff remain employed by AXA Investment Managers and exercise or continue to exercise in AXA Investment Managers.

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Founding Member of the Net Zero Asset Managers Initiative

20 yearsof experience in RI

25 Dedicated RI professionals(added to 100 professionals)

A comprehensive & Innovative RI fund

offering(incl. 49 Labels funds)

PRI 2020 Leader Group

A+

Proprietary scoring methodology and

research

20+ yearsof RI experience

€555bn*ESG integrated AUM

(89% of CORE AUMs)


Source: AXA IM. For illustrative purposes only. AXA IM reserves the right to modify any of the procedures, process and controls described herein at its discretion.*The ESG data used in the investment process are based on ESG methodologies which rely in part on third party data, and in some cases are internally developed. They are subjective and may change over time. Despite several initiatives, the lack of harmonised definitions can make ESG criteria heterogeneous. As such, the different investment strategies that use ESG criteria and ESG reporting are difficult to compare with each other. Strategies that incorporate ESG criteria and those that incorporate sustainable development criteria may use ESG data that appear similar but which should be distinguished because their calculation method may be different.

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• AXA IM Standards• Exclude non ESG-compliant

exposures

ESG Integration based on common foundations3 pillars incorporated across AXA IM Core portfolios

Long-term Investor dialogueProactively engage and vote

AXA IM Sectorial PoliciesResponsible Investment minimum exclusion policies

• Controversial Weapons • Palm Oil• Soft Commodities• Climate Risks

• Severe Controversies• White Phosphorus• Tobacco• ESG Low Quality

ESG Data & ResearchIntegrate ESG data in the research and portfolio construction stages of the investment process

Fra

mew

ork

AX

A I

M E

xclu

sio

ns

Ste

ward

ship

• Qualitative research• Quantitative research & analytics / ESG score

• Robust & measurable voting and engagement • Focus on strategic ESG issues • Engage before risks materialise


The ESG data used in the investment process are based on ESG methodologies based in part on data provided by third parties, and in some cases developed in-house. They are subjective and may change over time. Despite several initiatives, the lack of harmonized definitions can make ESG criteria heterogeneous. For example, different investment strategies that use ESG criteria and ESG reporting are difficult to compare with each other. Strategies that incorporate ESG criteria and those that incorporate sustainability criteria may use ESG data that appear similar but need to be distinguished because their calculation methods may differ.

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Our Responsible Investing offeringA full range of strategies to help you meet your goals

3 ESG Integration Pillars• ESG score/research used in investment process• Exclusions• Stewardship

ESG Integrated ESG incorporated into the investmentprocess to help achieve risk-adjusted returns

ESG score objective (for some funds) Thematic E/S/G objective and/or UN SDG Objective

ACTInvesting with purpose to support the transition to a more sustainable economy

3 ESG Integration Pillars• ESG score/research used in investment process• Exclusions• Stewardship

Sustainable Bond market


Green, social and Sustainability bond?A transparent tool to finance environmental or social friendly projects at no additional cost

6Source: AXA IM

ConventionalBond

Transparency

Environmentalor Social benefit

Risk remains at the issuer level

Projects have no directimpact on the performance

Annual reporting withimpact KPIs

Sustainable strategyinsight

Support employment, education and basic needs

Biodiversity preservation, clean energy & energy saving

International Guidelines

ICMA’s Principles and Climate Bond Initiative

Upcoming EU taxonomy and Green Bond standards


Green, Social and Sustainable Bond marketThere is more than Green Bonds

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Cumulative volume of issuance per year ($bn) Issuance breakdown by sector (%)

Social and Sustainability bond issuance picked up significantly over 2020 mostly thanks to

quasi-sovereign entities

$1,3tn market value

78 Social issuers

126Sustainable issuers

435 Green issuers

22%

63%

15%

Source: AXA IM, Bloomberg as at 31/05/2021 (Green bond market ex CNY, excl. outstanding <$300mio). For illustrative purpose only.

$361bnissuances YTD


Green Bond marketFrom a niche market to a credible and well balanced alternative to the Conventional bond market

8Source: AXA IM, Bloomberg as at 31/05/2021 (Green bond market ex CNY, excl. outstanding <$300mio). For illustrative purpose only.

Sector Breakdown Currency Breakdown

$842bn market value

A+ Average rating

7,6yduration

435 issuers

0,61%EUR Hedged yield

24,63%

16,23%

24,06%

16,73%

18,35%

Investment approach


Why invest in Green Bonds?

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Finance the transition to a low carbon economy

Reduce exposure to climate change risks: physical and transition risks

Invest in companies better positionned to seize opportunities in a low carbon economy (Renewable, EVs, Efficient buildings…)

Benefit from highest transparency requirements to track every project funded and quantify their impact

Invest in a very dynamic market segment


ISSUER’S SUSTAINABILITY STRATEGY

• Overall strategy’s alignment with green bond projects

• Environmental track record and targets

• Meetings with themanagement

• ESG Quality

PROJECT TYPES

• Transparency on projects

• Project greenness

• External certifications

MANAGEMENT OF PROCEEDS

• Financing new assets or Refinancing

• Internal process for tracking proceeds

• Segregated pool of assets

• External verification

IMPACT REPORTING

• Impact indicators reporting commitment

• Pre- and/or Post-issuance

• Relevance of KPIs

• Third party verification

A Dedicated Assessment FrameworkA proprietary process to define and monitor eligible Green investments

Source: AXA IM, for illustration purpose only.11

GO / NO GO


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AXA WF Global Green BondsPortfolio Overview

Finance the Transition towards

a low carbon economy

Transparent and measurable

impact metrics

A global and diversified

solution

• A purist approach that focuses on Green bonds

• 4 environmental themes: Smart energy solution, low carbon transportation,

Green buildings, Sustainable ecosystem

• A dedicated impact report with specific KPIs, and transparency regarding

environmental project financed

• A focus on SDG contribution towards environmental and societal issues

• A wide range of alpha sources from asset and geographical allocation to

term structure management

• A well balanced universe to navigate through market cycles

Robust and disciplined

investment process

• Global and Active Fixed Income process supported by large ressources

• A proprietary Green bond framework and ESG scoring methodology

.


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AXA WF Global Green BondsIn a nutshell

Performance

Environmental

Benefit

Credentials

6,32%Gross performance

over 2020

2,44%Annualized grossperformance SL

1st Quartile over 3Y, 5Y and SL

-57%

Carbon emission reductionto conventional issuance

63 cars removed

from the road per 1Mln invested

5% of Impact Funds Management fees to be donated to

charities

Source: AXA IM, 31/05/2021

Projects

44,90%

25,50%20%

9,60%

Smart Energy Solutions Low Carbon Transport Green Buildings Sustainable Ecosystem

esg integration and sustainable bond market

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