At AXA IM Select we believe in the importance of investing responsibly. Recognising the influence companies can have on the world around them, we aim to be aware of their actions and intentions when making our investment decisions.
Understanding the growing interest from clients wanting to ensure their investments are being used to deliver good for society (or at least do no harm), we want to make a difference over the longer term by investing in managers that follow a responsible investment process. This ethos is implemented by integrating ESG (environmental, social and governance) due diligence in our investment process.
How does AXA IM Select approach responsible investing?
As a multi-manager, we invest in a broad range of funds, rather than investing directly in companies. Therefore our approach involves making sure the funds we select for our fund of funds products are implementing ESG considerations as part of their investment criteria.
By using our influence as a big investor, we can help to direct investment flows into funds we believe are following ESG principles, and engage with the managers of those we think are falling short. A key part of our approach is to make sure that our funds can be successful for clients, whilst also having principles that reflect ESG integration.
As part of this, we have set goals on responsible investing which include:
- Ensuring the fund managers we select are implementing ESG considerations as part of their investment criteria.
- Making available investment options that meet the varying desires of our customers in the areas of Sustainability and Responsible Investing be that ESG integrated or sustainable options.
- Establishing appropriate governance to monitor processes and actions around Responsible Investing as a firm.
UN Principles for Responsible Investment and AXA IM Select
The UN Principles for Responsible Investment (UNPRI) are a voluntary set of six investment principles, backed by the UN, under which signatories commit to incorporating ESG factors into their investment decisions. We are proud to have been a UNPRI signatory since May 2018.
Previously signatories were awarded an overall score at the organisation level, and since joining we had been consistently given an A rating each year.
For our latest submission the PRI introduced a new scoring system, changing from an alphabetical system to a numerical system and also removing the overall organisation score. Instead scoring is now communicated across individual modules. As a result of these changes additional time was needed by the PRI to address feedback from a large number of signatories and so we received the results of our 2021 submission in September 2022.
Key highlights from our latest assessment
- Across all 9 modules we received either a 4 or 5 star rating, with all modules scoring higher than the median.
- We received 4* rating for the Investment and Stewardship Policy, scoring higher than the median score.
- Our highest rated modules were across Private Equity, Infrastructure and Hedge Funds, all achieving 91% or higher.
- Our modules that received the highest difference vs the median were Listed Equity Passive, Fixed Income Passive and Hedge Funds.
We are pleased with the results of our latest assessment and believe it reflects our continued commitment to evolving and improving our responsible investment practices to keep up with the latest ESG trends and to help drive change across our industry. This includes working closely with the underlying managers in our portfolios to make sure they meet our standards and helping them to develop their approach where necessary.
Architas E.P.I.C Global Equity Opportunities Fund
The Architas E.P.I.C Global Equity Opportunities Fund allows investors to make ethical and prosperous investment choices (E.P.I.C), utilising AXA IM Select multi-manager expertise to bring together what they believe to be the best fund managers available into one product for individuals to invest in. The fund gives investors access to three major themes centred around digital transformation, health & wealth and sustainable planet.
The objective of the Fund is to seek to provide long-term growth of capital with a medium to high volatility level from a diversified and actively managed portfolio of global securities with a focus on Sustainable Investments. Sustainable Investments are investments in companies engaging in economic activities that facilitate the achievement of at least one of the environmental (“E”) objectives[1] as provided for in the EU Taxonomy Regulation and/or social (“S”) objectives[2] as provided for in the EU regulation on sustainability-related disclosures in the financial services sector (“SFDR”), do not significantly harm any of these environmental and/or social objectives, and where the issuer of each investment follows, in the view of the Manager and/or Investment Manager, good governance (“G”) practices (when taken together, “ESG”).
When selecting the CIS to invest in, the Manager and/or Investment Manager will invest only in CIS which are classified as Article 9 in line with the SFDR i.e. underlying CIS which focus on Sustainable Investments in accordance with the SFDR (“Article 9 CIS”).
[1] The EU Taxonomy Regulation establishes six environmental objectives: (i) climate change mitigation; (ii) climate change adaptation; (iii) the sustainable use and protection of water and marine resources; (iv) the transition to a circular economy; (v) pollution prevention and control; and (vi) the protection and restoration of biodiversity and ecosystems.
[2] Under SFDR, the social objectives refers to tackling inequality or fostering social cohesion, social integration and labour relations, as well as, investment in human capital or economically or socially disadvantaged communities.
The independent ESG due diligence is mainly designed to assess an Article 9 CIS’s ESG integration capabilities. The due diligence relies on detailed proprietary ESG questionnaire, followed by face-to-face due diligence meeting(s) with the Article 9 CIS’s manager and cover:
- ESG policy and governance (e.g. review of ESG assessment report by independent external ESG bodies (where available), monitoring of whether the Article 9 CIS’s manager is adhered to the ESG policy in making the investment management decisions, accountability of the Article 9 CIS’s manager, alignment of the remuneration of the Article 9 CIS’s manager to the attainment of ESG objectives, etc.)
- Integration of ESG consideration in investment decision process of the Article 9 CIS (e.g. assessing reliability of the ESG data sources, analysis on how ESG consideration would impact securities selection process, assessment of the ESG exclusion criteria, etc.)
- Engagement and voting (e.g. whether the Article 9 CIS’s manager would attend shareholder meetings and exercise voting rights to influence the activities of the issuers of the Article 9 CIS’s underlying investments, and engage with the issuers of the Article 9 CIS’s underlying investments to promote good governance)
- Monitoring and reporting of the attainment of the Article 9 CIS’s ESG focus and investment objectives (e.g. assessing robustness of the ESG risk monitoring process, how the ESG’s performance is measured, accessibility of ESG performance reports, etc.)
The ESG questionnaire also includes a question in the Risk & Reporting section, focused on Climate RIsk, To factor that into our analysis, tor funds in scope, funds must score 0.5 or 1 in that question to be eligible for investment and funds that score 0 will be ineligible.
Using the information collected from the ESG due diligence as described above, the Manager and/or Investment Manager will form a view on the robustness of the ESG process of the Article 9 CIS (including peer comparison) and compute its aggregated ESG score with AXA IM Select in-house scoring process on the ESG dimensions. The ESG scoring is ranging from 5 (the best) to 0 (the worst). With positive screening, an Article 9 CIS with a higher ESG score would relatively have a higher chance to be selected for investment. Any Article 9 CIS which is scored below 3 will be removed from approved buy lists, and thus, such CIS will not be invested by the Fund. Typically, at least 20% of the Article 9 CIS which have passed the quantitative screening assessments would be screened out based on the ESG score.
On an ongoing basis, the Manager and/or Investment Manager will monitor the financial and ESG performance of the underlying Article 9 CIS based on external data and internal analysis. In case the ESG score of an underlying Article 9 CIS falls below 3, the Manager and/or Investment Manager will engage with the underlying Article 9 CIS manager to implement changes for improvement. Such underlying Article 9 CIS will be divested if there is no improvement on the ESG score back to at least 3 after 6 months.
The ESG data sources and processes used for reporting are currently under development and details will be available soon.
At AXA IM Select Asia Limited, we are committed to acting as a responsible investor on your behalf. A summary of the AXA IM Select Voting Policy is available upon request. The Voting Policy has been produced on the basis of describing AXA IM Select's approach to meeting best practice standards for the funds we manage directly and for the funds that we delegate to others to manage on our behalf.
Under S.I. No. 81 of 2020 the European Union (Shareholders’ Rights) Regulation which came into force on 30 March 2020, asset managers such as AXA IM Select are required either to publish an Engagement Policy and information concerning about how we comply with the regulations, or to explain why not.
The engagement policy must describe how the firm:
a) integrates shareholder engagement in its investment strategy,
b) monitors investee companies on relevant matters, including strategy, financial and nonfinancial performance and risk, capital structure, social and environmental impact and corporate governance,
c) conducts dialogues with investee companies,
d) exercises voting rights and other rights attached to shares,
e)cooperates with other shareholders,
f) communicates with relevant stakeholders of the investee companies, and
g) manages actual and potential conflicts of interest in relation to its engagement.
AXA IM Select has decided not to publish an Engagement Policy at this time.
As a ‘multi manager’ firm, apart from investment funds constituted as corporations, AXA IM Select does not invest directly in company shares. In the absence of clear regulatory guidance or clear market practice on how the engagement policy should apply to multi-managers, we have decided to continue to rely on our existing Voting Policy which works towards the same ends, but is based on guidance (such as individual guidance from the UK Financial Reporting Council) on how multi-managers should promote stewardship and engagement.
We will keep this decision under review and may publish an Engagement Policy at a later date if required by regulations or if such policy will add value to our clients.