ESG factors gaining momentum with investors says AXA

Clients are increasingly asking for the monitoring and assessment of environmental, social and governance (ESG) risks in their portfolios according to a report published by AXA Investment Managers.

“Investors are assigning greater importance to how ESG factors impact their returns in the long run” said Matt Christensen, Global Head of Responsible Investment at AXA IM. “In the last twelve months we have worked with several European pension funds as well as AXA Group to help them take responsible practices into account more explicitly. This is a clear trend and is gaining momentum.”

AXA IM has responded by increasing its stewardship activities and coverage. The volume of responsible investment assets managed by AXA IM grew by 18% in 2012. The team voted at 4,115 annual general meetings, up 42% on the previous year, and its proprietary platform, RI Search, evaluated 4,100 companies and 150 governments according to ESG.

“Smart beta and responsible investment are both garnering greater attention from investors. They may seem unrelated, but both approaches reflect a move by investors away from the unintentional and often uncompensated risks associated with traditional index tracking and a greater willingness by investors to make their own determinations about desired exposures, risks and expected returns,” added Christensen.

“There has been little academic research on their compatibility to date, but our back-tested investment analysis shows that ESG SmartBeta has the potential to offer investors a lower total risk and higher return than index investing, along with improved diversification and strong ESG performance. Responsible investment analysis is simply a good risk-aware way to manage a portfolio.”

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