Global asset management firm AXA Investment Managers (AXA IM) revealed a major increase in its stewardship activity over the past year, more than doubling the number of conducted engagements in 2022, with plans to continue to increase in this area in 2023, along with the consideration of escalation techniques on key issues such as climate and biodiversity.
The asset manager’s increased engagement activity was outlined in its newly release Stewardship Report 2022, which indicated that AXA IM conducted 596 engagements with 480 entities during the year, up from 283 engagements with 245 entities in 2021. AXA IM also significantly ramped the number of discussions held at the senior executive or board-level, with 178 engagements conducted at this level, compared to only 71 during the prior year.
The report also indicated that sustainability factors are a key focus of AXA IM’s stewardship activity, with more than three quarters (76%) of engagements in 2022 linked to UN Sustainable Development Goals (SDGs). AXA IM also introduced a “Sustainability Dialogue” approach in 2022, which accounted for 40% of engagements, with discussions led by portfolio managers or credit analysts and aimed at identifying ESG issues and enhancing sustainability practices to support long-term profitability.
By category, while climate change remained the main theme, representing 28% of engagements – and 39% of Sustainability Dialogues – the report indicated a broader focus on ESG issues, with a significant increase in biodiversity-related engagements at 18% of the total. The report says that AXA IM “expects investors to continue mobilising around the issue of biodiversity” in 2023. In December 2022, AXA IM became a founding member of Nature Action 100, an investor engagement initiative aimed at driving corporate action to address nature loss and biodiversity decline, which is expected to launch this summer.
Marco Morelli, Executive Chairman at AXA IM, said:
“Against a tumultuous backdrop that has seen misgivings about the case for environmental, social and governance investing in certain parts of the world, we believe it is now more important than ever to influence company behaviour through effective and robust stewardship. As a responsible asset manager, we see stewardship as a vital mechanism to power a just and green transition, with climate change, biodiversity and mitigating social risks centre stage of our activity in 2022.”
Going forward, the report indicates that AXA IM aims to increase the number of engagements in 2023, and also to increase oversight of the engagement process “to increase the chances of achieving the desired change within a company,” which “may lead us to use escalation more often or to work with peers or asset owner clients as part of collaborative initiatives.” AXA IM introduced a strengthened voting policy in 2022 aimed at urging portfolio companies to consider environmental and social issues, including a timeline to divest from climate laggards that fail to make sufficient progress, and requirements for senior management incentive pay to ESG and climate elements. The company also said that it could vote against companies that don’t show a sufficient response to biodiversity-related engagement requirements.
“When we engage with investee companies, we act with conviction and put great emphasis on achieving positive and specific ESG outcomes on behalf of our clients. If the response or outcome is unsatisfactory, we have robust frameworks in place and are not afraid to take decisive action.”
Additional key priorities for the firm detailed in the report include developing engagement in alternative asset classes including real estate, and transparency, with plans to improve fund-level engagement reporting capabilities.Click here to access the AXA IM stewardship report.