AXA IM will be launching a tool that will allow it to measure the direct impact of investment portfolios on climate, teaming up with Rosenberg Equities and other fintechs to create the system.
The metric for gauging climate impact is being designed with emissions from companies and other potential investments contributing towards the Paris Agreement, the UN pledge which aims to keep the global temperature rise this century below 2 degrees.
In addition, Mr Christensen’s team is also using artificial intelligence solutions in its investment decision making around real assets, using technology to factor in climate risks.
According to AXA IM, ESG integration will become an industry standard within the next few years, with the transition to impact investing, which proactively seeks a positive social or environmental effect, to be inevitable.
Speaking in Sydney, Matt Christensen, global head of responsible investment at AXA IM said his company is hoping to have its temperature gauge launched by the end of the year.
“We are working on a warming temperature gauge, that allows us to look at the aggregate portfolios of clients as a group compared to a benchmark and say, are we on track?” Mr Christensen said.
“There is a lot of fintech innovation happening in this, the key is to make it work for investors and there are still too many assumptions behind it.”
The firm noted it has partnered with a fintech that has modelled carbon budgets that will be required to meet the Paris Accord, examining countries as well as sectors.
The process also includes factoring in the UN’s sustainable development goals as well as proxies to gauge expectations from investors are holding of companies.
On AXA IM’s use of AI in real asset investing, Mr Christensen said: “There’s a whole catastrophe insurance line that looks at storms, mudslides and we’re starting to use that information to do a better job of geolocation on assets that we can put into a physical risk type of approach.
“If you think of supply chains of companies, what exposures might they have to the future of storms? Which companies have the most exposures there, and better understanding – did they take that climate change risk into account for physical assets?
“All of these are fintech solutions. We’re just at the beginning of trying to model with them and making decisions.”
The asset manager believes institutional investors can utilise the UN Sustainable Development Goals (SDGs), as the next step in responsible investing from ESG filtering.
AXA IM’s Real Assets chief executive Isabelle Scemama added that the SDGs will be important for asset managers in her space, who will be faced with challenges to continue to generate profit as real estate returns slow.
“Globally, buildings and construction together accounting for 39 per cent of energy-related carbon dioxide,” Ms Scemama said.
“The energy intensity per square metre needs to improve on average by 30 per cent by 2030 to be on track to meet global climate ambitions outlined in the Paris Agreement.
“The UN SDGs on climate will be useful guidance, and asset managers will need to engage closely with tenants and take direct action to ensure these assets remain viable and continue to generate value.”
Mr Christensen added that climate reporting will have to be adapted to make it palatable for investors.
“We say, this portfolio, for example, saved 15,000 metric tonnes of CO2 equivalent emissions. Well what does that really mean?” he said.
“We’re trying to put down some costs, so that means we took 3,000 cars off the road. I think this is the storytelling that the industry is looking to try and create to make these ideas that are noble but very difficult to process in the human brain.”
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