A green recovery: the post-pandemic opportunity

By Michelle Lacey, Head of Client Group, AXA Investment Managers Core Australia (AXA IM)

Increasingly, climate change and responsible investing are driving global political, business, and investment decisions. Climate and social activism were key areas of focus in the recent US election, with President-Elect Joe Biden recommitting to the Paris Agreement. Closer to home, ANZ has confirmed it will no longer finance the top 100 carbon emitters, while a super fund member successfully sued over climate related risks.

Research[1] shows that by 2050 Australia will experience economic losses on par with COVID-19 every year if climate change is not addressed.

However, COVID-19 has given the world an opportunity to reset its commitments to environmental, social, and governance (ESG) factors.

Overall, it’s estimated the global emission impact of COVID-19 will be -5.5% - the largest annual reduction since records began^[2].  Yet it would take a COVID-19-like event every year until 2050[3] to achieve our commitment to a 1.5-degree-world.

Positively, there is growing investor demand for responsible investment solutions that do good for the world. Research shows 9 in 10 Australians expect their investments to be managed responsibly[4].

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Advisers are also recognising the opportunities of providing ESG-integrated advice, with 90% of clients expecting their adviser to help them navigate the complexities of responsible investing[5].

Sustainable strategies, such as AXA IM’s Sustainable Equity strategy aims to manage risk and returns to ensure investors don’t compromise on performance while improving the overall ESG profile and avoiding harmful companies and industries.

Australian and multi-sector responsible investment funds outperformed mainstream funds over 1, 3, 5 and 10 year time horizons and further analysis shows the outperformance continued through COVID-19[6].

AXA IM’s Sustainable Equity strategy blends Quality and Low-Volatility factors which aim to deliver sustainable, long-term returns. We believe that this approach could help mitigate loss in falling markets and keep pace with rising ones - defensive attributes that were apparent at the height of the pandemic[7].

We consider ESG in three ways: targeting improved metrics, such as 40% lower carbon and water intensity than the benchmark[8]; excluding harmful or controversial stocks and sectors; and voting and engagement.

Active management means more than buying and selling shares. It means proactive ownership of stocks, voting at company meetings, and engaging with management and other investors to drive change. In the first half of 2020 we engaged more companies in a six-month period than ever before[9].

The unexpected ‘green lining’ of COVID-19, coupled with increasing demand for responsible investments, means we now have a strong opportunity to invest in a sustainable future, without sacrificing capital return and growth. 

More information on the Sustainable Equity Strategy can be found here.

This document has been issued by AXA Investment Managers Asia (Singapore) Ltd (ARBN 115203622) (“AXA IM Asia”). AXA IM Asia is exempt from the requirement to hold an Australian Financial Services License and is regulated by the Monetary Authority of Singapore under Singaporean laws, which differ from Australian laws.  AXA IM Asia offers financial services in Australia only to residents who are “wholesale clients" within the meaning of Corporations Act 2001 (Cth).

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