Stewardship

Our approach to stewardship comes from our strongly held belief that both company management and investors have critical roles to play in sustaining the health of financial markets and ensuring the effcient allocation of capital

We believe a proper consideration of environmental, social, and governance (ESG) matters will impact on the long-term sustainable performance of companies and benefit investors of such firms.

To this end, we:

  • Seek to understand the ESG issues that impact companies in which we invest
  • Encourage companies to align with best practice on ESG issues
  • Evaluate a company’s particular policies and practices in relation to relevant issues
  • Enter into constructive dialogue with a company when its approach and/or practices is below investor expectations
  • Align our votes at general meetings with our engagement objectives

For more information you can also refer to the stewardship section of our AXA IM RI Annual Report and to the AXA IM Corporate Governance and Voting Policy.

Our global engagement activities

Engagement highlights:

  • Carbon Action 100+ (collaborative initiative) 
  • Green and social bond issuers 
  • Corporate governance - executive pay and board

Through our engagement activities we continue to use our influence as investors to encourage companies to mitigate key environmental, social, and governance risks relevant to their sector.

During the year, we continued to push our stewardship activities around climate change, diversity, executive pay, and shareholder rights.

Climate Stewardship

As long-term investors, we have a key role to play in limiting global warming to a well below 2°C scenario. Our engagement aims to address climate related risks and opportunities through focused engagement. In addition, investors also need to come together and use their collective influence to bring about necessary change. As a result, we are also part of a number of collective initiatives engaging with companies in key sectors.

  • Climate Action 100+

One of the key initiatives we are part of is Climate Action 100+. Climate Action 100+ is a five-year initiative led by investors to engage systemically important greenhouse gas emitters and other companies across the global economy that have significant opportunities to drive the clean energy transition and help achieve the goals of the Paris Agreement.

We as investors are calling on companies to improve governance on climate change, curb emissions and strengthen climate-related financial disclosures. As part of our work with Climate Action100+ we are lead engagers on a number of companies, whilst also being co-lead or supporting engagers on a number of companies within the oil & gas, utilities, mining, and transportation sectors.

  • Proactive engagement on climate risks

Where we have concerns that companies are not responding adequately to climate-related issues we have engaged with companies on a direct basis in order to better understand the company position and to encourage better responses.

Where we have found these engagements are not progressing, we will use our voting rights, beyond shareholder resolutions, to vote against a range of resolutions including the annual report and accounts, director elections and remuneration.

  • Climate Related Voting

As per our corporate governance and voting policy we highlight the critical issue of climate change, and the importance we place on companies to manage the associated risks. This is reflected in our position to cast our votes at general meetings in favour of climate-related resolutions.

For 2018 we supported resolutions requiring reports on sustainability (report describing the company’s environmental, social, and governance (ESG) policies, performance, and improvement targets, including a discussion of greenhouse gas (GHG) emissions management strategies and quantitative metrics.) at companies such as Acuity Brands, Inc, Kinder Morgan, Inc, and XPO Logistics, Inc. In addition, we supported shareholder resolutions on GHG emission reduction targets and transition to a low carbon business model.

As we have done in previous years we have worked with Ceres, as US based sustainability organisation working with investors and companies to tackle sustainability challenges, and pre-declared our support for their shareholder resolutions calling on companies to perform 2 Degree Scenario Analysis to demonstrate portfolio resilience (Resolution Proposal: Assess portfolio impacts of policies to meet 2 degree scenario).

We pre-declared our support on the shareholder resolutions at the following companies:

-          Anadarko Petroleum

-          Great Plains Energy

-          Kinder Morgan

-          Noble Energy

-          SCANA Corporation

Similarly, within the automobile sector we supported two similar shareholder resolutions at General Motors Company and Ford Motor Company requiring the board ‘publish a report, at reasonable cost, describing whether and how our company's fleet GHG emissions will increase given its planned changed in fleet mix and industry's proposed weakening of corporate average fuel economy (CAFÉ) standards or, conversely, how it plans to retain emissions consistent with, or better than, CAFE standards to ensure its products are sustainable in a rapidly decarbonizing vehicle market’.

We felt that given the reputational and regulatory risks that the company faces in a carbon-constrained environment, increased disclosure relating to the company's management of its fleet emissions, including the company's updated global CO2 reduction targets are beneficial.

Diversity

We continue to believe that the ability of a board to adequately conduct its oversight responsibilities depends on it having the right mix of directors with relevant skills, backgrounds and experience. This naturally points to the important benefits that diversity can have on the long-term success of companies. We have been engaging with boards to promote diversity, both at the leadership level and throughout the company. Discussing diversity is now a standard agenda item and the tone regarding diversity issues, particularly in terms of gender representation at board level, is very positive.

As part of a natural evolution on diversity, we further evolved our policy to use our voting rights at companies which do not explain how they will boost the number of women on their board and workforce and where all-male boards continue to exist in developed market companies. 

This follows nearly five years of engagement with companies and looks at not just leadership or the visible face of a company, but rather about the broader workforce and the progression of women to roles where they can influence strategy and performance.

For 2018, this meant that we withheld support at a number of companies where we considered that not enough was being done to address diversity issues at a company.

Votes against management based on diversity concerns:

Executive Compensation

We consider that it is necessary to ensure that remuneration policies encourage high standards of performance, aligning the interest of management with those of long-term shareholders. Levels of remuneration should be sufficient to attract, motivate and retain management of a high calibre but should not be excessive by the standards of employment conditions within the company, sector or the executive’s country of residence.

Globally, attention is starting to move away from a sole focus on aligning executive rewards with share price performance, to a focus on how executive remuneration aligns with the general workforce and social expectations. This includes gender pay gap reporting requirements as well as pay ratio disclosure requirements in a number of different markets.

However, the majority of discussions on pay continues to revolve around quantum, targets, performance and alignment. AXA IM continues to hold companies to the highest of standards and where we feel that there is a misalignment between pay and long-term shareholder interests we will continue to dissent from management recommendations.

Voting

Voting at company meetings is an important part of the dialogue between a company and its shareholders. As an asset manager, it is a fundamental aspect of our fiduciary duty to our clients.

Our corporate governance & voting policy is based on principles of good corporate governance which serve to protect the long-term interests of shareholders.

Global and local guidelines

In addition to our global policy, we have voting guidelines for specific markets, recognizing that practices vary between jurisdictions and the companies in which we invest are subject to different local laws and regulations on governance matters.

When reviewing resolutions proposed at general meetings we continue to judge them against fundamental principles of good corporate governance, whilst taking account of best practice standards pertinent to the relevant market and the company’s particular circumstances.

During 2018, we exercised our clients’ voting rights globally in line with our investment footprint.

We do not vote in markets that still require investors to block shares or have imposed onerous administrative requirements on the exercise of voting rights.