Green and Social
AXA Investment Managers (AXA IM) believes that the investment industry can play a role in tackling sustainability related challenges, through the development of the green and social bond market.
Green and social impact investing involves purchasing bonds where the proceeds are earmarked for projects which support a low carbon economy or the basic needs of underserved populations and communities. They help finance a myriad of initiatives, including renewable energy, pollution prevention, access to healthcare, affordable housing and female empowerment. However, in terms of these bonds there is no overall industry standards on what constitutes a ‘green’ or ‘social’ bond - so we have developed our own framework for assessment.
This framework not only drives investments towards authentic green and social projects but also looks to raise the standards of the whole market. Selectivity is key in ensuring that only the most relevant and impactful projects receive the necessary financing. This framework has so far been used to review more than 450 green and social bond issuances and has led us to exclude around a fifth of bonds presented to us as green or social as it falls short of our assessment criteria.
Our green bond framework
AXA IM’s green bond framework is composed of four pillars:
The environmental, social and governance (ESG) quality of the issuer
A firm needs to demonstrate minimum ESG commitments, as we want to ensure that corporations properly deal with environmental and social risks in the projects financed. We also want to ensure the green projects being financed are strategic activities. A coherence between the environmental strategy and issuance is therefore necessary.
The use of proceeds
We believe that the use of proceeds of a green or social bond should reflect the issuer’s efforts towards improving the environment and society and its overall sustainability strategy. Full transparency regarding the projects financed and tracking the proceeds is essential.
Management of proceeds
An issuer must have sufficient guarantees in place to ensure the proceeds of the bond will effectively finance the eligible projects.
We pay particular attention to impact reporting, where both qualitative and quantitative indicators are expected. This allows us to demonstrate the positive impact of a bond on the environment and society.
Looking ahead – the continued evolution
The goal of our framework is to target and select bonds which meet our clients’ sustainable investment ambitions. This allows clients to invest in alignment with their values and ethics. Our analysts meet many issuers to discuss their businesses and to explain AXA IM’s green and social bonds framework. We also often use these opportunities to engage the issuers by sharing market best practices and areas where they can strengthen their sustainable financing approach. Our goal is to highlight what we expect from them in terms of their issuance, and if necessary help them improve their broader sustainability related strategy.
Discover how we deploy capital through private assets with the aim of generating positive environmental and social impact while delivering financial returns.
Using in-depth analysis of key ESG compliant metrics and performance indicators, discover our approach to impact investing in public and listed assets.
Impact investing is an exciting step in the evolution of responsible investing.
Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.
This promotional communication does not constitute on the part of AXA Investment Managers a solicitation or investment, legal or tax advice. This material does not contain sufficient information to support an investment decision.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX.
In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.