Our approach to impact investing in listed assets, or public assets, is built on five pillars:
Investments should be made with the upfront objective of having a specific positive social or environmental outcome
We aim to invest in companies where the positive outcomes are of material significance to the beneficiaries, companies or both
We principally focus on the extent to which a company is making its ‘needed’ products and services more accessible or commercially viable
A company’s corporate practices, products and services may significantly undermine the positive impact it is generating elsewhere. Consequently, it is important that negative effects – known as negative externalities - and a firm’s commitment to address them, are fully considered alongside positive outcomes.
There needs to be a clear methodology and commitment to measuring and reporting the social and environmental performance of investments and these need to be monitored over time.
How we assess companies
We believe there is no substitute for sustained, in-depth analysis. We aim to identify and track a range of impact metrics or key performance indicators across five categories: products and services; research and development; operations; corporate social responsibility initiatives; and negative externalities.
We integrate environmental, social and governance (ESG) factors into our impact investment process and approach impact investing through the themes outlined in the table below.
We seek to identify companies that are either impact leaders or transitioning companies. Impact leaders are companies which are highest-rated in terms of the net positive societal impact they create, either through their products and services or their corporate practices and operations. They also have a clear strategic intention to contribute to society and helping the environment while generating healthy financial returns.
Transitioning companies are those which exhibit ambition for significant permanent transformation in terms of the positive impact they make, that will also enhance their long-term financial returns. They will usually have plans for one of the following:
A dramatic change in the product mix of the company, which may take some time to materialise
Significantly reduce the negative externalities provided by their products
Dramatically improve the environmental or social outcomes of their operations, setting aggressive targets
For AXA IM, the key is to be explicit and transparent in what types of categories investee companies fall into and be able to clearly explain why they belong in an impact investment portfolio. Our assessment framework is designed to analyse companies so we can identify opportunities for a range of impact investing strategies in listed assets.
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