Axa Group exits tobacco – but not (necessarily) Axa IM

Axa Group, the French insurer with over 100 million clients globally, has decided to exit €1.8bn of tobacco investments to adhere with its ESG commitments – but Axa IM, the investment partner of Axa Group, says it will be down to clients to determine whether it exits tobacco.

The Group statement on its decision notes that about half of cancer cases are caused by “lifestyle choice”.

“Tobacco consumption is the major cause of long term non-communicable diseases. Today, tobacco kills 6 million people per year, a figure that is expected to rise to 8 million by 2030, mostly in developing countries. Unless urgent action is taken to reverse this trend, tobacco will kill one billion people worldwide during the 21st century. Its cost, estimated at €2.1trn per year, equals the combined expenses of war and terrorism. The damage to health from tobacco products is more costly to society than that caused by alcohol or obesity.”

The decision to divest will result in an immediate sale of some €200m of tobacco equities, and the run-off of existing holdings in some €1.6bn of tobacco industry bond holdings, the Group stated.

Thomas Buberl, ceputy CEO and incoming CEO of Axa, said: “We strongly believe in the positive role insurance can play in society, and that insurers are part of the solution when it comes to health prevention to protect our clients. Hence, it makes no sense for us to continue our investments within the tobacco industry.”

“With this divestment from tobacco, we are doing our share to support the efforts of governments around the world. This decision has a cost for us, but the case for divestment is clear: the human cost of tobacco is tragic; its economic cost is huge. As a major investor and a leading health insurer, the Axa Group wants to be part of the solution, and our hope is that others in our industry will do the same.”

However, an Axa Investment Managers (Axa IM) spokesperson confirmed that the Group level decision is not automatically applied to the investment products offered by the asset management business.

In a related statement, the manager said: “…our activity reflects the demands of our clients including divestment from tobacco if this is requested by a client for their mandate.”

“Our RI specific funds already exclude tobacco stocks and we manage a number of segregated mandates where the client has asked us to not invest in companies that derive profit from tobacco.”

“Our proprietary RI Search tool provides all of our portfolio managers with access to detailed environmental, social and governance analysis allowing them to data mine and to isolate specific ‘risks’ such as tobacco or carbon, as well as aggregated ESG risks.”

“We take an active approach to monitoring companies and act as stewards of investments made on behalf of our clients. Stewardship entails our considered approach to the management of our clients’ assets keeping in mind their long-term interests and engaging with company representatives on issues of concern that impact the company’s long term performance. In particular, our engagement focuses on situations where a company’s strategy or performance on environmental, social and governance issues leads us to believe that there may be a material impact on the company’s performance.”

Group RI policy

According to information provided by Axa Group, divestments have already taken place on the basis of its responsible investment (RI) policy development, which it defines as “the integration of environmental, social, and corporate governance (ESG) considerations into investment processes and ownership practices, in the – increasingly documented – conviction that these may impact both risks and returns.”

“Axa actively takes ESG considerations into account in its investment decisions for all relevant asset classes. Hence, Axa has developed a responsible investment policy, which covers the Group’s €552bn general accounts, sets out its position and beliefs on RI, and defines the corporate governance practices that its asset managers are expected to encourage, including via engagement and voting as an investor.”

“The policy also allows for a better structured development of investment guidelines for sectors that pose particularly acute environmental or ethical challenges, for which guidelines are progressively defined. Guidelines cover a number of sectors, including:

– controversial weapons,
– palm oil and forestry,
– coal extraction and coal-based energy,
– soft commodities derivatives”

“In 2015, Axa decided to reduce its exposure to companies with a high involvement in coal-related activities including coal mining and electricity production. This represents a divestment of almost €500m, a choice that helps not only to reduce the portfolio risk but also to develop an approach more consistent with Axa’s corporate responsibility strategy towards climate change. In parallel, the Group has pledged to triple its ‘green’ investments in its general account assets to more than €3bn by 2020.”

 

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