Fund Size: £60.29m

Total screened & themed / SRI assets: £426025.69

Total Responsible Ownership assets: £426025.69

Total assets under management: £702579.79

As at: 30/11/22

Contact: UKClientService@axa-im.com

Overview

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Fund information

Policy

This Fund is part of AXA IM’s global ACT range of products, which implement a responsible investment approach as part of their investment strategy. The ACT range is designed to enable investors to take action on global environmental, social and government (ESG) issues through their investments. These strategies go beyond ESG integration, by setting sustainable investment as their objective and seeking to achieve this by either following a process in which investment decisions are driven by ESG themes or by seeking out intentional, positive, measurable and sustainable impact.

The AXA ACT Framlington Clean Economy fund invests in equities, in accordance with AXA IM RI sectorial policies and ESG standards, and invests at least 80% of its investments in shares of listed companies of any size which are based anywhere in the world that the manager believes will generate both above-average returns and a positive and measurable impact on the planet, incorporating the analysis of environmental, social and governance (ESG) factors.

In selecting shares, the Manager applies the AXA IM RI sectoral policies to address ESG tail-risks, which include, e.g.:

• Exclusion of controversial weapons
• Exclusion of climate risks
• Considering ecosystem protection & deforestation
• Exclusion of soft commodities

In addition, we also apply the AXA IM ESG standards which are focused on:

• Tobacco - to avoid financing the tobacco industry and thus contribute to protecting public health
• Defense - to avoid financing companies involved in the development, production, maintenance or sale of incendiary weapons with white phosphorus
• UNGC principles - to avoid financing companies in violation of the United Nations Global Compact, OECD guidelines for MNE, ILO Conventions or UNGP for Business and Human Rights
• ESG quality - to carefully monitor companies with the worst ESG practice
• Countries with severe human right violations
• Companies exposed to severe controversies.

The full AXA IM sector specific investment guidelines and the AXA IM ESG Standards policy are subject to change and the latest copies are available from the Manager on request.

In addition to the application of the above policies, the manager will use the company’s ESG score to exclude those companies in respect of their Environment or “E” scores. The Manager will also use the ESG score as one factor within its broader analysis of the company to make selection which are expected to generate growth over time and to contribute to the transition to a sustainable economy. The ESG score is, however, just one component of the Manager’s investment process and is not the sole driver of the investment decision making process.

Further to the initial screening against the ESG criteria (as described above), the Manager will then seek to identify companies with exposure to the clean economy. The Manager defines the clean economy as the universe of companies whose activities address the environmentally focussed UN Sustainable Development Goals through improving resource sustainability, supporting the energy transition or addressing the issue of water scarcity.

The Manager will focus on such companies which operate across the following four key areas:

• Low carbon transport
• Smart energy
• Natural resource preservation
• Agriculture & Food Industry (but may also invest in such other industries which contribute to the clean transition)

The Manager will aim to select high quality companies in these areas, including by using a responsible investment ‘selectivity’ approach which selects on the basis of qualitative factors such as commitment of the company to achieve and measure impact against the UN Sustainable Development Goals (with a particular focus on the planet), its strategic direction and consideration of ESG risk, among other considerations. The Manager will also take into consideration their technologies, quality of management, expected profitability, their prospects for growth and investment in sustainability goals.

If an investment no longer meets the criteria above, the Manager will disinvest in accordance with its best execution policy.

The Manager has full discretion to select investments for the Fund in line with the above investment policy and in doing so may take into consideration the MSCI AC World Total Return Net (the “Benchmark”). The MSCI AC World Total Return Net is designed to measure the performance of mid-cap to large-cap stocks from a number of developed and emerging markets as selected by the Benchmark provider. The Benchmark best represents the universe of companies from which the portfolio will be selected, following the application of the Manager’s ESG standards and criteria.

The Fund may also invest in other transferable securities and units in collective investment schemes. The Fund may use derivatives for Efficient Portfolio Management. Use may be made of borrowing, cash holdings, hedging and other investment techniques permitted in the applicable Financial Conduct Authority rules.

Process

The AXA ACT Framlington Clean Economy fund is highly selective in the companies invested in. The application of AXA IM sectorial policies, AXA IM ESG standards, environmental screen and CleanTech thematic filter form the earlier stages of the investment process; bottom-up stock selection forms the heart of the investment process. at stock level, we actively seek out companies with:

• A clear alignment with the six targeted environmental UN SDGs through their products & services
• A strong ESG profile
• Long term strong revenue/margins growth
• Market leading products
• Pricing power / cost control
• Appropriate funding structure
• Sustainable or improving profitability

Rigorous Impact Investing process

We seek to identify these companies based on our rigorous proprietary impact framework developed by our listed equity Impact Analysts team and based on the below five key pillars:

• Intentionality
  • Investments should be made with an upfront objective of positive social or environmental outcomes. Our research seeks to identify companies that demonstrate an intentional, strategic commitment to positive impact.
• Materiality
  • Invest in companies where the positive outcomes are of material significance to the beneficiaries, the company, or to both.
• Additionality
  • The extent to which a company is making its 'needed' products and services more accessible or commercially viable, for example through innovation and new technologies, lower prices or better distribution.
• Negative Externalities
  • A company's corporate practices, or products and services, may significantly undermine the positive impact it is generating elsewhere.
• Measurability
  • There needs to be a clear methodology and commitment to measuring and reporting the social and environmental performance of investments.

Our listed equity impact analysts focus mainly on how a company’s products & services contribute to achieving the UN SDGs. For each company, the Impact analysts develop a thesis regarding company impact and record KPIs which allow us to measure the company’s impact.

We consistently monitor KPIs relevant to the company and where we consider the most material impact. For example, within our Smart Energy theme, the KPI may be renewable energy capacity added. Tracking these KPIs allows us to judge the social contribution of companies and the progression over time. As a result, we are better equipped to judge on businesses’ ability and extent to contribute to or achieve specific SDGs. KPI monitoring also helps to highlight obvious disclosure gaps of companies. When this tracking is done across a breadth of firms within a certain sector or impact theme, it additionally guides in making comparisons, allowing us to see obvious areas for improvement.

The overall companies’ score is decided after calculating the weighted average of individual pillar scores. This determines the Impact category in which the company is falling into.

At AXA IM, we have established three main Impact categories:

• Impact Leader: Companies in this category are the highest rated in terms of sustainably generating positive societal impact. Products and services Impact Leaders are firms that sell goods and services that are of critical value, and generate significant additionality by leveraging technology, scale and innovation to make their product and services accessible and commercially viable in potentially underserved markets.
• Impact Contributor: Impact Contributors generate significant positive societal impact but have not obtained the “Impact Leader” status due to considerations regarding impact theme alignment purity (e.g. only a small proportion of revenue may contribute to the SDGs while the rest of the business is largely neutral), lack of corroborating disclosures, the severity of the issue being addressed, or negative externalities.
• SDG-Aligned: These companies contribute positively to environmental or social objectives, and do not significantly harm environmental or social objectives, but their net positive contribution is deemed insufficient to warrant Impact Leader or Impact Contributor status.

Companies that do not meet the criteria for the above categories are considered non-impact. Specifically for the AXA ACT Clean Economy strategy, we mainly focus on Impact Leaders and Contributors companies.

As a responsible, active and long-term investor, we encourage and support companies to improve their transparency and actionability of disclosed data - mainly through engagement. It is once again critical in this aspect, as it promotes better disclosures and reporting, as well as commitment to long-term financial returns alongside meaningful societal impact.

Fundamental analysis

 Portfolio managers interact on a regular basis through formal meetings, as well as on an ad-hoc basis with ESG analysts, Impact analysts and the RI Team, allowing the best ideas to flow from research into the security selection process.

Regular site visits and meetings with management teams are fundamental to the research process. This enables a deeper understanding of a company’s business model, the quality of its management team, their strategic commitment for growth, the competitiveness of the company’s products/services, and ultimately, prospects for revenue and profits growth.

Valuation discipline underpins the portfolio. Company valuation is another important element and a consideration of future earnings per share (EPS) and future cash flow is critical. Traditional valuation metrics, including price/earnings (P/E), EV/EBITDA, EV/Sales and price earnings growth (PEG), are utilised amongst other metrics. Ultimately, every investment decision taken by the portfolio managers are considered in the context of the potential for growth, relative to the price paid. This is to ensure we do not overpay for growth, but also to make sure that we do not miss opportunities on stocks which may look expensive at first on a valuation point of view only.

Resources, Affiliations & Corporate Strategies

Resources, Affiliations & Corporate Strategies

 External Qualitative Research: We use the research of ESG specialists like MSCI, Sustainalytics, ISS (proxy voting and UN SDG alignment) to complement the contribution of quantitative ratings. Investment professionals also have access to external qualitative research through brokers, etc.

Internal Qualitative Research: The RI research capabilities are organised as follows:

• A central ESG Research Team focusing on thematic research, corporate governance, and shareholders engagement as well as on developing quantitative solutions. Climate, human capital/ diversity, and health have been identified as the key thematic priorities for this team.
• ESG specialists within the investment platforms conduct ESG analysis at the company level.

We have 34 dedicated RI experts, embedded within investment and research teams, who are responsible for our RI related activities and cover Research, Data/Scoring, Analytics, Stock/Credit Analysis and Active Ownership/Engagement.

We can also rely on 100 professionals whose RI is an essential in their day-to-day routine; this category of staff is composed of portfolio managers, credit analysts, sales, investment analytic people and Investments specialists.

More specifically, the RI research capabilities are organised as follows, within AXA IM Core:

• A RI Research team responsible for thematic research with a focus on climate, biodiversity, human capital & diversity as well as health, nutrition, and data privacy, ensuring it translates into implementable investment decisions across platforms. This team also leads shareholders engagement on those themes. Within this team, dedicated RI Analysts are in charge of defining the eligible Green, Social and Sustainability bonds universe. They rely on our proprietary framework notably inspired by the Green and Social Bond Principle (GSBP) and the Climate Bonds Initiative (CBI) Standards.
• A RI Coordination and Governance team responsible for transversal RI projects and corporate governance including voting policy on key themes mentioned above. The Active Ownership strategy is built and led jointly with the RI Research team.
• A RI Solutions, Tools and Models team dedicated to the development of ESG quantitative solutions. As such, the team has developed a proprietary ESG framework and RI Search platform, providing portfolio managers and analysts with ESG raw quantitative data, KPIs, internal and external research and ESG scores.
• ESG specialists within the investment platforms oversee product development, the operational implementation of ESG processes, building portfolio RI eligible universes and support the integration of ESG criteria and RI approaches within portfolio construction and decision-making processes.
• ESG analysts integrated within investment teams: ESG specialists are embedded the investment teams to conduct ESG analysis at the company level, working closely with fund managers. They integrate ESG criteria in their assessment of an investment, our conviction being that ESG provides a complementary analysis to traditional financial research; these issues may have financial impacts for companies in the short and/or long-term time horizon.
• Impact analysts integrated within investment teams: they perform qualitative impact analysis on companies based on five key pillars, reviewing their products or services and operational activities to demonstrates whether a company contributes to the Sustainable Development Goals or to a specific impact.

ESG related business development activities are led by specialized investment specialists, who work hand in hand with investment teams. Ultimate accountability for responsible investing lies with Hans Stoter, Head of AXA IM Core.

We play a proactive role in several industry initiatives and groups and take a leadership role as often as possible, including those listed below:

• 30% French Club Investor Group,
• 30% UK Club Investor Group,
• 30% Japan Club Investor Group,
• Advance,
• Access to Medicine Index,
• Access to Nutrition Initiative,
• ALIGN Project under EU Business@Biodiversity programme,
• Asset Management and Investors Council (AMIC) - Sustainable Finance Working Group,
• Association Française de Gestion (AFG) - Responsible Investment and Corporate Governance Committees,
• CDP (Carbon Disclosure Project),
• CERES,
• ChemSec,
• Climate Action 100+,
• Climate Bonds Initiative,
• Coalition Transition Juste,
• CRREM,
• EC B@B (European Commission Business@Biodiversity),
• ESG Open Data Platform,
• European Commission Platform on Sustainable Finance,
• European Fund and Asset Management Association (EFAMA) Stewardship and ESG Standing Committee,
• European Public Real Estate Association (EPRA),
• Eurosif (European Sustainable Investment Forum),
• European Sustainable Real Estate Initiative (ESREI),
• FAIRR,
• Finance for Biodiversity Foundation,
• Forum per la Finanza Sostenibile (ItaSIF),
• FIR (Forum pour l’Investissement Responsible - France),
• GIIN (Global Impact Investing Network),
• Global Canopy,
• Green Building Council Italie,
• GRESB (Global Real Estate Sustainability Benchmark),
• International Corporate Governance Network (ICGN),
• ICMA – Green and Social Bond Principles,
• ICMA - Sustainable Finance Committee,
• IIGCC (Institutional Investors Group on Climate Change),
• Impact Management Project,
• INREV (European Association for Investors in Non-Listed Real Estate Vehicles),
• International Sustainability Standard Board (ISSB),
• Investment Association (IA) - Sustainability and Responsible Investment Committee,
• Investor Alliance for Human Rights,
• Institut de la Finance Durable – Investors for a Just Transition,
• Nature Action 100,
• Net Zero Asset Managers,
• Observatoire de l'Immobilier Durable (OID),
• One Planet Asset Management WG,
• Operating principles for Impact Management,
• UN PRI (Principles for Responsible Investment),
• Responsible Investment Association Australasia, SASB –
• Sustainable Trading,
• Sustainability Accounting Standards Board,
• Taskforce on Scaling Voluntary Carbon Markets,
• ULI (Urban Land Institute),
• UN PRI - Deforestation Commodities Practitioners Group,
• UNEP FI (United Nations Environmental Program Finance Initiative),
• VBDO (Dutch Association of Investors for Sustainable Development),
• World Benchmarking Alliance,
• World Economic Forum (WEF) – Net Zero Carbon Cities

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Dialshifter

This fund is helping to ‘shift the dial from brown to green’ by..

The fund aims to contribute to the reduction of global greenhouse gas emissions by investing in listed companies whose activities improve resource sustainability, support the energy transition or address issues of natural resources and food scarcity, directly addressing the environmentally focused UN SDGs. The fund is highly selective in the companies invested in, with stocks displaying a clear alignment with the six targeted UN SDGs through their products and services, as well as having a strong ESG profile, therefore investing for the greater good.

Our organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by...

The road to net zero is challenging to navigate and requires a collective effort. We want to be one of the leaders on this journey: in our investment choices, the products we offer, the way we engage and vote, and manage our business.

This includes our commitment to manage 65% of our total 2022 AUM in line with net zero by 2050 and to aim to exit all coal investments in OECD countries by 2030. Furthermore, we use of a carbon transition framework to track the progress of companies towards net zero targets and helping us to engage accordingly.

Literature

• Fund overview & literature (including factsheet)
• Engagement Report
• TCFD Report
• Policies & Reports

Disclaimer

This document has been prepared by AXA Investment Managers for the sole use of the company to whom it is addressed. It may not be copied or circulated, in whole or in part, outside that company, without the prior written consent of AXA Investment Managers. Whilst reasonable care has been taken by AXA Investment Managers to ensure that this document is current at the date of issue, no warranty of accuracy is given, and any information contained within it may be subject to change without notice. Furthermore, the data including but not limited to scenarios and investment guidelines set forth in these materials are presented for indicative and/or illustrative purpose and such data including but not limited to scenarios and investment guidelines could vary significantly from the final investment policy and/or actual results. The figures provided relate to previous months or years and past performance is not a reliable indicator as to future performance. The value of investments may fall as well as rise and investors may get back less than they put in. Nothing contained within this document shall constitute an offer to enter into, or a term or condition of, any contract with the recipient or any other party. This document shall not be deemed to constitute investment advice, or an offer for sale or solicitation to invest in any particular fund. Subscriptions to funds are accepted only from eligible investors on the basis of the relevant current prospectus or Information Memorandum.

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In September 2023 AXA streghthened their RI policies:

• Climate Risk
• Controversial Weapons
• EcoSystem Protection & Deforestation
• Soft Commodities

Please see the text under “Exclusion” in each section for changes.

No major changes have been made to the AXA IM ESG Standards Policy, however this document was also updated and strengthened as at September 2023.

The policies can be found on the AXA IM website (Our Policies and Reports | AXA IM UK (axa-im.co.uk)).

Last amended: 01/11/23 11:02