AXA has been committed to sustainability for years, and that includes its investments. We spoke to Daniel Gussmann, Chief Investment Officer of AXA Switzerland, about the areas AXA is focusing on and how they influence its investment decisions.
Daniel Gussmann, what role do sustainable investments play at AXA?
As an insurer, we're directly affected by climate events and other global risks, and that's why we've been working hard to address these issues for many years. It's very much in our interest to contribute to a sustainable and healthy world. With this in mind, AXA endeavors to play a pioneering role when it comes to sustainability. We firmly believe that responsible, sustainable use of all resources adds value for everyone over the long term – not just our customers, but also society at large.
Isn't sustainability simply a matter of course these days?
Yes, it is. Companies can no longer afford to ignore it. That said, there are big differences in terms of the extent to which companies have genuinely incorporated the topic into their business models. If you're serious, just talking about it isn't enough.
What exactly is AXA doing?
The AXA Group has attached a great deal of importance to this topic for years and has a comprehensive sustainability strategy. It has developed its own system for measuring impacts and progress on an ongoing basis: the AXA for Progress Index. This is binding for all AXA units and assesses AXA's sustainability efforts as an insurer, an investor, and a model company generally.
What does that mean specifically with respect to AXA's investments?
We factor environmental, social, and governance (ESG) criteria into all of our investment decisions and invest strategically in companies that operate sustainably. Sustainability criteria thus play a key role in the investment process. Any businesses that isn't sustainable just isn't tenable for us – and this applies not just to our investments, but to our insurance operations as well.
Which fields of business are most affected?
The exclusion criteria include tobacco producers, palm oil producers that are associated with the destruction of rain forest, companies that manufacture or trade in weapons, and all companies that derive more than 20% of their revenues from tar sand, shale oil, coal mining or the generation of energy from coal.
«Companies that operate sustainably also enjoy greater financial success.»
How exactly do you factor that into your investment decisions?
We assess firms on the basis for our clearly defined ESG standards and regularly track their performance. If a company fails to comply with our ESG guidelines and shows no sign of improvement, it's blacklisted for exclusion from our investments. This means that we'll sell any investments we have in that company and refrain from making any new ones. We apply these standards rigorously, restricting or even completely ruling out investments in certain sectors and industries. We currently analyze and rate more than 8,000 companies, around 720 of which are blacklisted.
AXA also fosters active dialog with over 300 multinationals, seeking to support them in steering toward a more sustainable future (AXA Group Responsible Investment Policy).
Don't all large corporations have blacklists like that?
AXA goes a lot further than other firms in many respects. Some asset managers have just a few dozen companies on their blacklist, whereas we have hundreds. One of the reasons behind our pioneering role is the fact that the French government has imposed much stricter rules on corporate responsibility than are the norm in other countries, so we benefit from having a French parent company in this sense. In fact, the AXA Group goes even further than the French government demands.
Our leading role in many areas of sustainability is also reflected in independent ratings such as those of MSCI ESG Research, which has given AXA the highest possible rating of AAA with a score of 10/10 for sustainable investment.
Is climate protection AXA's top priority in terms of sustainability, or does the focus lie elsewhere?
Climate protection is definitely a priority in our strategy. Back in 2015, AXA was the first major insurer to announce that it would successively pull out of investing in the coal industry. Our aim is a global energy mix with no coal at all. The full withdrawal will be completed in the OECD area by 2030 and worldwide by 2040.
In line with the Paris Agreement on climate change, we've also set ourselves the target of limiting the global warming potential of our own investments to less than 1.5°C by 2050. We also intend to have 75% of our real estate certified with a recognized sustainability label by 2030. Among its many other commitments, AXA is also a member of the Swiss Climate Foundation, and it has already reduced its own energy consumption by enough to qualify as a climate-neutral company.
Of course, climate protection isn't the only issue we're addressing. Social justice, health, and prevention are also vital to our sustainability strategy.
What goals has AXA set itself for the coming years?
Besides gradually pulling out of the coal industry and systematically implementing our ESG guidelines, the AXA Group intends to put a total of EUR 26 billion into environmentally friendly or "green" investments by 2023. On top of this, AXA is investing in transition bonds, an innovative asset class developed in-house that, among other things, supports companies transitioning from carbon-intensive business models to low-carbon alternatives.
Naturally, we can't solve the biggest sustainability problems on our own. We also promote sustainable development by exercising our voting rights at the general meetings of companies we invest in and seek direct dialog with a view to raising awareness of sustainability.
We've been a member of various national and international initiatives for years, including the United Nations Principles for Responsible Investment (UNPRI), the UN Global Compact, the Net-Zero Asset Owner Alliance, and Swiss Sustainable Finance. This allows us to play an active role in developing sustainable financial services.
AXA is even forgoing business in the interests of sustainability. To what extent is sustainability simply a matter of whether companies can afford it?
We've observed for years that companies that operate sustainably also enjoy greater financial success. It's clear that sustainability factors are more than just "nice to have"; they can really drive performance. We want to encourage other companies to take the same approach. After all, it's in everyone's interest to keep risks under control and ensure that our world's sustainable and healthy.