AXA IM launches its first low-carbon US High Yield fund

AXA Investment Managers (AXA IM) has launched the AXA WF US High Yield Low Carbon Bonds Fund, demonstrating the firm’s commitment to delivering sustainable, long-term value for clients while driving meaningful change for society and the environment.  

The fully ESG-integrated fund will use a sustainable investment approach to exclude many of the most carbon intensive sectors including metals, mining and steel producers, utilities, and most sub-sectors within energy. In addition, the ESG scores of companies will be considered in the investment process.  

As part of AXA IM’s ACT fund range, the fund adheres to AXA IM’s Sectorial Exclusion Policies and ESG standards policies which include screening measures to minimise exposure to companies with low ESG scores. ESG research and key performance indicators, including carbon and water intensity scores, will form a key part of the investment decision-making process. Within the remaining investible universe, the carbon intensity and water intensity scores of issuers will be analysed to avoid those companies seen as excessively carbon and water intensive. This further contributes to the fund’s target for carbon and water intensity that is at least 20 per cent lower than that of the benchmark.  

The fund’s asset allocations will then be driven by fundamental credit assessment and relative value analysis. Within the overall portfolio, at least 90 per cent of companies will have an ESG score, at least 90 per cent will have a carbon intensity score, and at least 70 per cent will have a water intensity score. The fund has the ability to invest in companies that we believe demonstrate credible plans for reducing carbon and water intensity in the future or offer products that help other businesses improve their environmental footprints.  

AXA IM will also leverage its ESG engagement capabilities to encourage these companies to improve their environmental impact. The fund will form part of AXA IM’s Sustainable investing offering, a subset of the firm’s ACT range, and will be classified as Article 9 under the EU Sustainable Finance Disclosure Regulation (SFDR). It is currently registered and available to professional and retail investors in the UK, France, Austria, Belgium, Denmark, Finland, Germany, Italy, Liechtenstein, the Netherlands, Norway, Spain, Portugal, Sweden and Luxembourg.  

Carl ‘Pepper’ Whitbeck, manager of the AXA WF US High Yield Low Carbon Bonds Fund, says: “At AXA IM, we believe the global economy has entered a ‘decade of transition’ towards a more sustainable, de-carbonised model. During this transition, we believe portfolios aiming to proactively reduce carbon intensity should be better positioned to withstand non-financial risks and outperform the broad market.  

“Carbon and water intensity are two widely followed ESG key performance indicators and among the most important metrics to look at when analysing the environmental impact of companies in the US high yield space. We consider the AXA WF US High Yield Low Carbon Bonds Fund to be a traditional core US high yield strategy that can be easily compared to the broader benchmark, but with a significantly lower carbon footprint to help clients meet their ESG objectives.  

“Amid the ongoing hunt for yield, the improved prevalence of ESG scoring for companies in the US high yield universe in recent years has allowed for the development of low carbon US high yield portfolios. Our experience has been that avoiding high carbon intensity issuers is beneficial on both total return and volatility measures, making the new fund a strong addition to our existing US high yield offering.”