AXA IM welcomes 2020 RIAA Benchmark Report
AXA Investment Managers (AXA IM) has welcomed the release of the annual Responsible Investment Benchmark Report 2020, published by the Responsible Investment Association Australasia (RIAA), and renewed its call for carbon ‘footpath’ investment.
This year’s RIAA Benchmark Report shows that in 2019, Australian and multi-sector responsible investment funds outperformed mainstream funds over one, three, five and 10 year time horizons. Further analysis shows the outperformance has continued amidst the major market disruption brought on by Covid-19.
The data also shows Australia’s responsible investment market continued its upward trajectory in 2019, with AUD1,149 billion in assets under management, a rise of 17 per cent from 2018. Responsible investment now represents 37 per cent of Australia’s total AUD3.155 trillion in professionally managed assets.
Yo Takatsuki, Head of ESG Research and Active Ownership at AXA IM, says the RIAA Benchmark Report plays an important role in providing clear and transparent data on responsible investment strategies.
“This year’s report highlights the significant growth in responsible investment and shows investors do not need to compromise on performance to invest responsibly,” he says.
“The Covid-19 crisis has highlighted the increasing importance of active ownership and provided an opportunity to redouble our efforts as responsible investors to drive change. In the first half of 2020, AXA IM increased its engagement activities around human health, public capital, and shareholder rights, and engaged more than 180 issuers at around 4,300 shareholder meetings globally.”
Takatsuki adds that 2020 had also been significant from an environmental perspective, as a result of historic falls in greenhouse gas (GhG) emissions.
Australia’s GhG emissions have fallen to their lowest levels since 1998, with Covid-19 restrictions decreasing carbon dioxide levels by 10 million tonnes between April and June. While globally factory closures, lockdowns, bans on large gatherings, and transport curtailment have seen emissions drop by around 4 per cent, the largest annual reduction ever recorded.
“Despite historic drops in global emissions, AXA IM’s research shows it would take a COVID-19-like event every year until 2050 to reach our commitment to a 1.5-degree world,” Takatsuki says.
“We have been given a glimpse of the kind of adjustments our world needs to make if we are to definitively tackle the looming threat of the climate crisis. Far from distracting us from this, Covid-19 should harden our resolve while teaching us valuable lessons.”
To do this, AXA IM believes in taking a ‘carbon footpath’ approach, rather than a decarbonisation, ‘footprint’ strategy.
“A pure divestment, decarbonisation approach can pose unintended problems for investors. These problems may arise in the form of increased active risk, reduced diversification, and can also mean investors have less leverage to use when engaging with companies. We also believe a blanket approach to divestment means companies who are evolving may not have access to enough capital to facilitate positive change,” Takatsuki concludes.