We set out to address some of the biggest sustainability challenges globally
The asset management units of insurance groups develop their business under special conditions. The business philosophy of the parent companies is of great significance. This has an impact on risk affinity, asset class allocation and also on the transformation of processes towards sustainable and/or impact-oriented portfolio management. Hans-Jürgen Dannheisig, co-issuer of EXXECNEWS INSTITUTIONAL, talked about this with Jonathan Dean, Head of Impact Investing at AXA Investment Managers in London.
ENI: First a personal question: What significance does the increasing understanding of sustainability have for you personally and in your career?
Dean: My first exposure to sustainability came through my studies when I ran a research project on Sustainable Development. Many years later, I am now seeing the same principles manifest themselves in my career as an asset manager. These are two paths that traditionally would never have crossed; however, it shows the importance sustainability has taken in all of our lives today, both personally and professionally. Sustainability topics have transcended their original fields and now affect our decision making as consumers; how we raise our children…and in my professional case, how we make investment decisions.
ENI: What are the particular challenges and drivers of an asset manager in an insurance group with regard to the development of impact investing?
Dean: Impact investing strategies are extremely important for asset owners, such as an insurance company, where they can be a powerful tool to align the use of assets and their proceeds to create positive outcomes for society and the environment. This begins with a risk management exercise to ensure ESG risks and sustainability are considered in portfolio management, but impact investing goes further by actually identifying problems linked to society or the environment and investing in solutions which materially address them.
Finding a close alignment between the asset owner and asset manager is extremely important when designing and delivering an impact investing programme. Some of the key areas for collaboration include:
- Investing in solutions to large scale problems through an impact investing strategy can help mitigate the risks an asset owner, such as an insurance company, has on its core business
- Large scale impact investing programmes are very visible and are therefore a meaningful representation of how an asset owner and asset manager can communicate their values and purpose to stakeholders
- If the first two topics can be achieved whilst delivering market rate returns on the assets invested, then impact investing certainly demands its position in any allocation exercise
ENI: How did you start the “journey” to a systematic process in your company and where are you today?
Dean: At AXA IM Alts, our overarching impact mission is to empower what we value – the planet we inhabit and the people we serve. Through our impact investing activities, we aim to address the needs and aspirations of underserved people by providing access to essential goods and services and protecting the natural environment in which communities are based and earn their livelihood.
We will invest in commercial, scalable, solutions that aim to widen access; reduce costs; improve the quality of life and general well-being of underserved beneficiaries in relation to these critical basic needs. Our investments will also leverage on technology and other innovations to enable access at scale to basic needs and essential services.
From there, we implement our investment strategy to align with our mission and impact objectives by focusing on specific themes. Through our four strategies, we address specific underserved areas of the market and empower emerging economies through tailored investing. Building on ten years of experience with impact investing at AXA IM Alts, the strategy has expanded to cover all aspects of impact investing, aligned with the UN’s SDGs and the associated targets and indicators.
ENI: What are the biggest challenges when implementing an impact strategy?
Dean: As impact investors, we set out to address some of the biggest sustainability challenges globally, including principle adverse impacts such as climate change and decreasing biodiversity, gender inequalities, socioeconomic imbalances, amongst others. A lot of our work is focused on underserved emerging markets, which can bring with it additional challenges such as data quality, logistical hurdle on travel, local currency volatility, and geopolitical tensions.
However, being active managers, we have a strategic approach to address these challenges, which in turn creates investment opportunities and positive societal impact in these markets. By meeting the challenges of today and tomorrow, we believe we will create long-term value for all our stakeholders, and we are taking steps now to transform this conviction into action.
Through active investment and ownership, we are doing our part to effect meaningful change and create the future we want to be part of. Across the AXA IM Alts impact strategies, we are fully committed to integrate ESG considerations into our investments in the following ways:
- Defining the investable universe through negative screening: Our sector exclusion and ban lists include coal, tar sands, palm oil, munitions & UN Global compact controversies
- Integrating ESG factors into decisions: We thoroughly assess all sustainability risk across all our current and future investments through applying our proprietary ESG scoring methodology to determine the dedicated score of each investment relative to our internal benchmark
- Integrating ESG into ownership: We manage and optimise sustainability risk by integrating ESG performance targets for all our strategies into annual business planning
ENI: What role does impact investing play in the context of broader sustainable investing?
Dean: At AXA IM Alts, ESG and sustainability is engrained into every aspect of our decisions making across all of our strategies. Our ESG strategy is not abstract or theoretical but instead is about the real actions we are taking today, whether deciding where to invest or creating the built environment of the future.
Underneath our broader ESG umbrella, impact investing plays a crucial role. Through our impact investing strategies, we quantify the direct positive influences our investments have had on underserved societies. This enables us to also determine the gaps in our focus areas to ensure we are meeting our impact objectives and are aligning with the broader business in terms of ESG initiatives.
ENI: What are your current projects on this?
Dean: Through the four strategies, we have a wide range of ongoing impact projects. In April 2020, we launched our fourth impact strategy, focused on health. The first milestone for the strategy was a partnership with Global Health Advisors (GHIA). This strategic partnership aimed to increase access of low-to-middle income beneficiaries in developing countries to innovative and quality healthcare solutions that improve health outcomes, by investing in a range of companies and projects focusing on pharmaceuticals, vaccines, medical devices, MedTech, digital health and healthcare delivery models.
Another winning project we have invested in is a 13.9 million US-Dollar series C round for US-based medical device developer, Alydia Health, focused on addressing postpartum haemorrhage. Alydia is developing a state-of-the-art intra-uterine device to facilitate contraction of the uterus and thereby stop bleeding after childbirth. Through this investment, we are working to improve maternal health outcomes, reduce global maternity mortality rate, and extend use of devices to low- and middle-income countries. This project also aims to empower all women and girls to further the gender equality agenda.
ENI: What are your plans for this year and the following years in terms of further developing a sustainable/impact-focused offer for external and internal customers?
Dean: Today we are focused on managing our existing portfolios to optimise both the financial and impact performance of our companies and projects. We are also engaged on value creation exercises across AXA IM Alts and AXA Group to bring strategic insight and support to specific initiatives in our portfolios particularly in climate, healthcare and financial inclusion.
We are constantly assessing the opportunity-set and development of sectors which are in scope for either our social or environmental impact strategies – and we expect to continue developing products across these themes as the urgency to act and find scalable solutions to climate change and social inequalities continue to increase.
Jonathan Dean is Head of Impact Investing at AXA Investment Managers (AXA IM) in London. Working as part of the AXA Group, the asset manager AXA IM has over 2,400 employees and manages 866 billion euros in assets, 568 billion of which are ESG-integrated.
The German translation of the interview was first published in EXXECNEWS INSTITUTIONAL issue 08/2021.
