Investors are changing their approach to how they analyse and value businesses.

Sustainability is at the centre of this new approach to investing, which puts more emphasis on longer-term returns, and is more sensitive to how current business models impact both the planet and people.

In terms of tackling climate change, the world needs to dramatically accelerate it efforts, says Hans Stoter, Global Head of AXA IM Core Investments at AXA Investment Managers (AXA IM):

“Climate change is a very urgent problem and we need to act now. We need to reduce our carbon emissions as a society. You see that societies are moving towards more sustainable business models. Next to that we see new industries emerging, for example carbon capture and storage, hydrogen, sustainable food production and agriculture. Those are all expecting growth opportunities and investment opportunities for the future.”

With these new technologies, there are opportunities for investment in businesses that will protect rather than harm the environment. It is the stated aim of AXA IM to be a responsible asset manager that invests actively for the long-term for its clients.

Stoter adds:

“AXA IM has the ambition to be the world’s leading responsible investor. We aim to lead the transition towards a more sustainable economy. That doesn’t mean just in our investments but also in how we manage our company as a business.”

AXA IM is a member of Net Zero Asset Managers initiative, an international group of asset managers committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner – and to supporting investing aligned with net zero emissions by 2050 or sooner. The scheme already has 128 signatories and has $43 trillion in assets under management. For Stoter, the scheme ensures that the investment management industry can collectively change course for a better future:

“The asset management industry has significant power and influence, but it also comes with the responsibility to help the world move towards a more sustainable path. We do this through the allocation of capital, the choice of the companies we invest in and the engagement with those companies to make sure that they continue on the path for a lower carbon world.”

These ideas need putting into action. To achieve this, the company has put in place what Chris Iggo, CIO Core Investments, at AXA IM, calls a ‘three-pillar approach to investment’:

“The first pillar is to develop a comprehensive database which covers ESG factors for the thousands of companies that we invest in. The second pillar is to decide what not to invest in, so we exclude investments in certain activities. The third pillar is our engagement policies with companies and their management to understand how they are running their businesses and how their businesses can be sustainable in the future.”

Particular attention is paid to how companies are monitored over time and ongoing engagement with the management of those companies. Targets are set with direct reference to the UN’s Sustainable Development Goals embedded within each company’s key performance indicators. For Iggo, the process is essential to identifying the climate leaders:

“We use our ESG database to identify those companies that, for example, have the lowest carbon emissions, but we also focus on technology and those companies that will enable the transition to a low carbon future – that could be in the areas of renewable energy or electric vehicles or battery production. The technological opportunities are moving very quickly. It’s very exciting from an equity investment point of view to identify those technologies that will deliver this new cleaner low carbon future.”

Hans Stoter believes that the fundamental key to a sustainable future is less about the nature of an industry, and more about how investment flows into those industries. By putting climate change front and centre of AXA IM’s investment policy, he says that profit can drive desirable behaviour:

“When we invest in companies, we seek dialogue. Through this engagement, we can encourage meaningful change on climate issues because we believe that this is the number one problem for the world today.”

Stoter believes that AXA IM will become and remain the benchmark as a responsible asset manager and is already looking ahead to extending beyond climate towards biodiversity, deforestation, clean water and other sustainable opportunities.

Chris Iggo sums up the attitude towards investment within AXA IM:
“We have a responsibility to help finance the energy transition and the transition to a more just and equal society. We believe we can have a better world both from an environmental and social point of view, and a wealthier world through smart investment choices.