ESG Clarity is exploring the decarbonisation targets set by Net Zero Asset Managers’ initiative (NZAM) firms as well as talking to individual fund groups about how they are finding the journey to net zero.
See also: – ESG Clarity’s Net Zero Database
Here Clémence Humeau (pictured), AXA Investment Managers head of sustainability coordination and governance, explains why AXA IM started by committing only 15% of assets under management (AUM) to net zero and how its approach has changed as the commitment has grown.
How have you found process of creating net-zero targets?
It is not an easy process as methodologies are still new or in the works and the achievements of long-term targets will require the whole economy to shift in the right direction progressively. Also, we had to factor in the context of the regulatory framework being reinforced.
We were the first French asset manager to join the NZAM – many of our local peers had questions on how the commitment interacted with the local regulatory context. Many more asset managers have joined now, and actually, Article 29 of the Energy Climate Law, enforced in 2022, requires us to implement an investment strategy aligned with Paris Agreement goals. It’s really positive to see the aligned ambitions.
What are the main updates to AXA IM’s targets from those published in November 2021 to those published in May this year?
We chose to start cautiously as we were still developing our net-zero approach. There were many questions around how such a commitment would be regarded from a regulatory perspective, especially for a French asset manager. We now have reassurance on many of those points thanks to clarifications from various regulators.
Also, we found COP26 an additional reminder of the need to be ambitious and to accelerate our efforts.
We intensified the effort and resources of teams across the business – with close involvement from our executive chairman who oversaw the methodology used to put together the revised target.
Finally, we moved from a bottom-up approach at fund level to a top-down approach at asset class level. We are working on reshaping a number of funds to be net zero.
In terms of the target itself, we had previously committed 15% AUM, or $159.3bn, and have now committed 65% of AUM, or around $650bn (€603.1bn) as at the end of May 2022, to being managed in line with net zero.
Interim carbon intensity reduction targets applicable to corporate assets have also now been set with a view to achieve -25% for 2025 and -50% for 2030 vs 2019.
Have you used any third-party support to set your targets or meet them?
Yes, to develop our net-zero strategy we rely on frameworks developed by industry initiatives as well as on external data from third-party data providers. We were supported by a consulting firm to work on the target setting, bringing support on the project management side for a project that requires aligning several stakeholders.
What are your thoughts on the progress of the NZAM as a whole?
It is great to see the collective momentum and willingness of many actors to develop collectively robust approaches.
A key moment for signatories was a new requirement to report in a more granular manner on our targets and how we achieve them via CDP and Principles for Responsible Investing. The NZAM will need to show the robustness of its process and governance to avoid the criticism of greenwashing – that will be a moment of truth.
What has been the biggest challenge in decarbonising your portfolios?
We face a number of challenges in the development of our net-zero strategy, including access to reliable and tangible raw data and metrics. Although initiatives to encourage issuers to report in a more homogeneous, transparent and usable manner are multiplying, ESG data remains heterogeneous and therefore complicated to use when investing and reporting.
An additional challenge is industry frameworks must be adjusted to the characteristics of our portfolios, including geographies, asset classes and sectors. At the early stage of defining our decarbonisation approach and methodology, we also consider the operational implementation of the strategy to make sure our commitments are monitored in a robust and efficient manner.
How are you building net zero into the culture of the firm?
In 2020, AXA IM’s management board decided to fully embed responsible investment activities within investment functions, meaning improved collaboration between investment platforms, support teams and dedicated responsible investment teams.
More and more teams are now involved in the validation of the AXA IM’s sustainability strategy and implementation. As an illustration, a net-zero taskforce has been created to develop AXA IM’s net-zero strategy with investment teams, responsible investment teams, compliance and risk teams.
Finally, AXA IM has a dedicated corporate responsibility team that actively engages with all areas of the business to explore opportunities to push for progress on our key pillars to ensure we walk the talk, and do ourselves that which we ask of others.
AXA’s net-zero goals
| When did you sign up to the NZAMI? | December 2020 |
| AUM committed to net zero (£) | 513.6bn (as at 30 May 2022) |
| % AUM committed to net zero | 65 |
| Timeframe | 100% of AUM in material sectors is considered net zero, aligned or aligning by 2040. |
