Climate-aware Buy and Maintain

Resilient credit strategies for a new era.

What is climate-aware buy and maintain credit?

Our climate-aware buy and maintain credit strategy is designed to benefit from the climate transition by understanding how the physical risks of climate change and the political and regulatory momentum around the issue will impact the value of credit investments over time.

We base our strategy around three core objectives: Capital preservation, climate alignment and credit return and build our portfolios using a maturity-based approach to climate-risk, with clear objectives over short- to long-term time horizons.

Credit investors must act to adapt to this new reality, and we have the tools to help them do it.

Why consider investing in climate-aware buy and maintain?

Institutional investors often have a long-term focus, aiming to build resilience both for today and for decades to come. That has made climate-aware investing an inescapable part of portfolio construction.

Long-term credit forms the core of buy and maintain strategies and as an asset class has a natural alignment with the time horizon over which climate-related risks can materialise. What you invest in today should deliver resilience, both by allaying those risks and fostering a successful transition to a low-carbon economy.

One of the key pillars of our approach is the inclusion of specific climate-related objectives that reflect our clients’ priorities and requirements. The goal is a tailored solution that can help protect portfolios against the risks, fulfil regulatory obligations and meet financial objectives – all while positively contributing to the climate transition.

How do we deliver a climate-aware strategy?

At the heart of our Climate-Aware Buy and Maintain approach is a three-step process to optimise portfolios for the transition: Assess, Integrate and Monitor (AIM). Our goal is to give clients the ability to AIM for net zero and align with the Paris Agreement decarbonisation pathway.

Assess

A surge in the volume and quality of data available around climate risks has made it possible for investors to gain effective insights into their portfolios from a climate perspective. It has also coincided with increased regulatory scrutiny around climate-related disclosures for institutional investors1 .

The outcome of a portfolio assessment might be to seek alignment  with the Paris Agreement on climate change. This is often interpreted as the pursuit of net zero greenhouse gas emissions by 2050, with interim goals in place to smooth the journey. We also believe investors should look to the carbon pathway of assets, rather than simply the current footprint, to find best-in-class companies targeting decarbonisation.

Integrate

There is no passive route to building climate-aware portfolios. Once the assessment is complete, security selection is crucial in building investors’ portfolios to mitigate against emerging climate risks while seeking to secure the required financial returns over time.

The vibrant green bonds market will form part of the solution. Additionally, using a best-in-class approach across all sectors can enable schemes to maintain diversification while allocating capital to market leaders to ensure a whole-of-market transition. The maturity of bonds bought is also important as some climate risks are more likely to emerge over time, reducing the appeal of climate laggards at the long end. We use scenario analysis to guide investment decision making in a variety of scenarios, backed by deep fundamental analysis from our 40-strong credit2  research team and a conviction-led, climate-focused engagement programme.

Monitor

Climate investing is constantly evolving. Monitoring the steady flow of new commitments and data is critical if investors are to properly understand whether their climate-aware credit portfolios are achieving their financial and climate objectives.

The next decade will likely see further improvements in the quality and availability of data from issuers. This may include clearer assessments of so-called Scope 3 emissions which relate to the indirect effects of company products and services. More generally, there is significant impetus around the greater use of Science-Based Targets which will aid transparency.

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Building financial and climate resilience in a long-term credit portfolio

Source: AXA IM and UBS Delta, Sample model long-term credit portfolio. For illustrative purposes only
Our ACT Range strategies

Our ACT range is designed to enable our clients to invest in the companies and projects leading the transition to a more sustainable world. These strategies go beyond ESG integration, either following a process in which investment decisions are driven by ESG themes or seeking out intentional, positive, measurable and sustainable impact.

ACT range

Clean Tech

Innovative companies are creating solutions to address pressures on scarce natural resources and the need for greenhouse gas emission reduction.

ACT range

Green bonds

Green bonds are among the most interesting innovations of the last decade in the field of socially responsible investment products.

ACT range

Multi-asset impact investing

Our impact approach is about investing in prosperity for people and prosperity for the planet.

ACT range

US high yield low carbon

We believe the global economy has entered a ‘decade of transition’ towards a more sustainable, de-carbonised model.

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Responsible Investing

Climate-aware investing at AXA IM

As a responsible asset manager, we actively invest for the long term to help our clients prosper and to secure a thriving future for people and the planet

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