The Net Zero Investment Framework in action: AXA Investment Managers

Originally published by IIGCC 

How does the Net Zero Investment Framework (NZIF) help investors? We spoke to Clémence Humeau of AXA Investment Managers to explore how they have used NZIF to move from commitment to implementation, setting all four targets and stretching ambition along the way. 

The four Net Zero Investment Framework targets: 

  1. Portfolio decarbonisation reference target
  2. Portfolio coverage target
  3. Engagement threshold target
  4. Allocation to climate solutions target

AXA IM was one of 70 investors who contributed to the development of The Net Zero Investment Framework (NZIF), which launched in March 2021. A little more than three years later it has become the most popular transition plan and target-setting methodology for investors who have set a net zero commitment today. 

Of those, AXA IM’s targets are among the most developed – it’s one of 10 IIGCC asset managers using NZIF to have set all four targets. Clémence Humeau, AXA IM’s Head of Sustainability Coordination and Governance caught up with us to outline how they have used the guidance so far. 

Clémence Humeau, Head of Sustainability Coordination and Governance, AXA IM

The first target 

Like most investors, AXA IM found that the process of moving from commitment to target setting took some time, especially in the early days. They first considered portfolio decarbonisation: 

“We started our first target in October 2021, mostly focused on carbon intensity reduction”, Clémence explained: “Then, we reviewed and worked with our teams, exploring how the commitment could be ambitious, but also practicable and credible.” 

“The combination of all targets is the spirit of NZIF and the best way to achieve real world change.” 

As understanding developed, the team decided to take a more holistic approach. Rather than looking at one target individually, they restarted and set out to establish all four targets from the beginning, considering how each NZIF target can complement another. 

“We wanted this to lead to actual change within teams. From there, we felt that combining all dimensions of all targets was the right way to go,” Clémence said: “We had to develop a methodology to combine quantitative and qualitative input – a vector for managers alongside financial information.” 

Many asset owners committed to net zero also use NZIF, creating a ‘shared language’ between owners and managers which helps both parties to understand and support one another’s requirements. This includes a common approach to asset assessment using NZIF’s alignment maturity scale, which helps investors assess an asset’s pathway to net zero. The framework also offers flexibility in data selection criteria to support these assessments. 

This, together with its compatibility with other guidance, helps investors to build the most accurate picture possible. It also helps to explain why NZIF is endorsed by global investor net zero initiatives including the Net Zero Asset Managers initiative, of which AXA IM is a founding signatory. 

“The combination of all targets is the spirit of NZIF and the best way to achieve real world change, and within AXA AM, integrate those commitments as broadly as possible,” Clémence said. 

Engagement opportunity 

An iterative approach is fundamental to the framework, which added two new components for private equity and infrastructure in 2023. It also emphasises investor engagement with companies to support a ‘bottom-up’ approach to emissions reductions – engaging with high-emitting assets – and a ‘top-down’ approach, such as strategic asset allocation. 

“Combining [the portfolio coverage target] with the engagement target, with NZIF, means being able to rely on individual and collaborative engagement,” Clémence explained, highlighting the opportunity for regular reviews of company voting policy and the importance of escalation. IIGCC’s net zero voting guidance aims to support investors in this space. 

Of the four, which is the most challenging target? 

Climate solutions, Clémence nods, though in her view it is also a particularly important one. The challenge is due in part to changing market conditions, as well as a lack of decision-making power for asset managers over fund strategy. That responsibility remains with its clients. 

AXA IM currently has 6% of its assets under management to be allocated to climate solutions by 2025 and will continue to review their approach over time. 

Raising ambition 

During the target-setting process, the team were able to significantly increase its percentage of assets under management to be managed in line with net zero, raising ambition from 15% to 65%. This was prompted in part by senior management, who wanted to go further and remain a leader in the field. 

“When setting our first target in 2021 we were flying blind – [IIGCC] workshops help you to share ideas.” 

The introduction of Article 29 de la Loi Énergie Climat in France also played a part. The policy aims to improve disclosures on climate and biodiversity approaches, and also requires financial market participants to progressively implement decarbonisation targets across the assets they manage – regulation which helped AXA IM to clarify the eligibility of assets. They used short-term support from consultants to help with the initial, resource-intensive demands. 

Determined to embed this ambition across the organisation, AXA IM also updated its company-wide remuneration policy, linking deferred compensation with net zero targets. This sent a clear message to the wider organisation and empowered the sustainable investing team. 

Admittedly, not every investor has the resources at AXA IM’s disposal, but Clémence has some cost-effective advice for anyone taking their first steps with NZIF: 

“Attend IIGCC’s workshops! They are a good starting point,” she smiled: “When setting our first target in 2021 we were flying blind – the workshops help you to share ideas.” 

Looking ahead, AXA IM are optimistic, but realistic, about the implementation challenges to come: “We have top management support, but what’s also important is transparency and conversations internally, to address challenges along the way. Targets are the easy part.” 

The net zero investment framework will continue to evolve with its users to support that journey.