AXA IM ramps up stewardship activity with companies with a twofold leap in engagements

• 596 engagements conducted with 480 entities in 2022, compared to 283 engagements with 245 entities in 2021.
• Climate change remained the largest area of engagement in 2022, while biodiversity-linked activity recorded a sharp increase.
• Strengthened voting policy led to at least one vote cast against management in 60% of AGMs.
• ESG expectations are reinforced ahead of 2023 voting season.

“Against a tumultuous backdrop that has seen misgivings about the case for environmental, social and governance investing in certain parts of the world, we believe it is now more important than ever to influence company behaviour through effective and robust stewardship. As a responsible asset manager, we see stewardship as a vital mechanism to power a just and green transition, with climate change, biodiversity and mitigating social risks centre stage of our activity in 2022.”

“When we engage with investee companies, we act with conviction and put great emphasis on achieving positive and specific ESG outcomes on behalf of our clients. If the response or outcome is unsatisfactory, we have robust frameworks in place and are not afraid to take decisive action. The report details this and is evidence of our commitment to transparency. Over the course of 2022, we intensified our engagement with investee companies by conducting extensive discussions on ESG matters and we are happy to report that most companies we’ve engaged with have been increasingly responsive to meaningful dialogue,” said Marco Morelli, Executive Chairman at AXA IM.

2022 engagement and voting activities key highlights

With 596 engagements conducted with 480 entities in 2022, AXA IM’s engagements doubled in 2022, reflecting its continuous endeavour to further improve the governance, resourcing, and reporting of its engagement efforts. Additionally, more discussions were held at senior executive and board level (30% of engagements in 2022 versus 25% in 2021).

As detailed in AXA IM’s 2022 Stewardship report¹ :

• Climate change remained the main theme of engagement (28%), in addition to several environmental and social topics now being addressed alongside governance, showing increased integration of these considerations into the company’s strategy.
• 18% of overall engagements were linked to biodiversity; this theme recorded a sharp increase, along with the progressive rollout of the strengthened Deforestation and Ecosystems Protection Policy. These engagement activities were further underpinned by the integration of new biodiversity-specific data developed with Iceberg Data Lab, and the publication of a new biodiversity footprint metric in our Task Force on Climate-related Financial Disclosures (TCFD)-Article 29 report. Additionally, as a founding member of Nature Action 100 (NA 100), AXA IM will take part in a collaborative engagement programme for investors to engage with companies and policymakers on nature.
• The share of corporate governance-related engagements remains significant (20% of overall engagements), reflecting AXA IM’s strongly held belief that effective corporate governance is a prerequisite to the appropriate deployment of environmental or social policies and practices.
• An update on the “three strikes and you’re out” engagement policy rollout, for companies deemed to be “climate laggards.” For those that have been insufficiently responsive the use of escalation techniques (such as voting against resolutions or co-filing a resolution) will be considered in 2023, with divestment being the last step.
• The strengthened voting policy, further integrating ESG issues into corporate governance, led to a 14% opposition rate, with at least one vote against cast in 60% of the meetings voted. The highest level of opposition remained for board issues (42% of votes against), followed by executive remuneration (26% of votes against).

Additionally, AXA IM’s engagement policy was adjusted² in 2022 to draw clearer lines between different types of dialogue:

• “Engagement with objectives” (60% of the engagements): driven by thematic research and mainly led by thematic experts are supported by investment teams with an explicit goal to achieve change within a company.
• “Sustainability dialogue” (40% of the engagements): introduced in 2022, this approach is less intensive and often led by portfolio managers or credit analysts. This type of dialogue focuses on companies where the continued enhancement of sustainability practices aims to help support the robust, long-term profitability of the company. Where weaknesses are identified, it may lead to using escalation techniques in certain cases, or to initiate a more formal “engagement with objectives”.

Expectations for the 2023 voting season

Ahead of the 2023 voting season, AXA IM continues to reinforce its ESG expectations³ with new recommendations in its voting policy relating to governance of sustainability and the appointment of former Chairman & CEO as non-executive Chair as well as tax transparency.

AXA IM will continue to further integrate its engagement objectives in its voting activities:

• In line with the strengthened Deforestation and Ecosystems Protection Policy, AXA IM could vote against boards of companies that have been insufficiently responsive to biodiversity-related engagement requirements.
• Companies will continue to be held accountable when there is insufficient progress during thematic engagements, and AXA IM may vote against relevant board members.
• In specific cases of escalation as part of the dedicated engagement programme for companies identified as “climate laggards,” co-filing of resolutions may be initiated.
• Boards will be held accountable to ensure implementation of previous ESG-related shareholder resolutions that gained significant support.
• AXA IM will maintain a high-level of support of its ESG-related proposal, adopting a case-by-case approach⁴ .

Notes to editors

All data sourced by AXA IM as at 31 December 2022.

Source: AXA IM, Stewardship report, April 2023