Fund Name | SRI Style | Product | Region | Asset Type | Launch Date | |
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Phoenix Wealth AXA IM Ethical Distribution Pn | Ethical | Pension | UK | Mixed Asset | 31/08/2009 | |
As at: 30/09/23 Contact: UKClientService@axa-im.com |
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OverviewThis Pension product is linked to the "AXA Ethical Distribution" fund. The following information refers to the primary (OIEC) fund.
The AXA Ethical Distribution fund invests in UK equities and UK fixed interest securities, including UK fixed interest and index linked gilts, in accordance with its ethical screening criteria.
The fund has strict ethical screening criteria on the equity portion, defined by the investment team and implemented by a 3rd party specialist provider. This screening removes companies whose products, services or method of operation do not meet minimum ethical standards from the fund’s investable universe.
Collaboration with AXA IM’s Responsible Investment team and the Quant Lab, provides valuable extra financial analysis and the ability to identify both ESG risks and opportunities within the portfolio.
In addition, engagement with invested companies is also done at a company level. AXA IM views engagement as a mean for investors to influence, shape and shift investee company policies and practices to mitigate risks and secure long-term value. |
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FiltersFund informationSustainabilityEnvironmental policy Sustainability policy Limits exposure to carbon intensive industries Environmental damage and pollution policy UN Global Compact linked exclusion policy Sustainability focus Encourage more sustainable practices through stewardship Nature & BiodiversityDeforestation / palm oil policy Unsustainable / illegal deforestation exclusion policy Biodiversity / nature policy Responsible palm oil policy Climate Change & EnergyNuclear exclusion policy Coal, oil & / or gas majors excluded Climate change / greenhouse gas emissions policy Fracking and tar sands excluded Arctic drilling exclusion Fossil fuel reserves exclusion Fossil fuel exploration exclusion - direct involvement Human RightsHuman rights policy Child labour exclusion Oppressive regimes (not free or democratic) exclusion policy Social / EmploymentSocial policy Labour standards policy Mining exclusion Ethical Values Led ExclusionsEthical policies Animal welfare policy Animal testing exclusion policy Tobacco and related product manufacturers excluded Armaments manufacturers avoided Alcohol production excluded Gambling avoidance policy Pornography avoidance policy Civilian firearms production exclusion Banking & FinancialsPredatory lending exclusion Governance & ManagementGovernance policy Anti-bribery and corruption policy Avoids companies with poor governance Encourage board diversity e.g. gender Encourage TCFD alignment for banks & insurance companies UN sanctions exclusion Encourage higher ESG standards through stewardship activity Fund GovernanceESG integration strategy Asset Size & MetricsInvests in small, mid and large cap companies How The Fund WorksStrictly screened ethical fund Limited / few ethical exclusions* Negative selection bias Focus on ESG risk mitigation Significant harm exclusion SRI / ESG / Ethical policies explained on website All assets (except cash) meet published sustain'y criteria Impact MethodologiesAim to deliver positive impacts through engagement Labels & AccreditationsRSMR rated (OEIC funds only) Intended Clients & Product OptionsIntended for investors interested in sustainability Available via an ISA (OEIC only) Portfolio SRI / ESG options available (DFMs) Multiple SRI / ESG portfolio options available (DFMs) Bespoke SRI / ESG portfolios available (DFMs) Fund management company informationAbout The BusinessESG / SRI engagement (AFM company wide) Responsible ownership / stewardship policy or strategy (AFM company wide) Responsible ownership policy for non SRI funds (AFM company wide) Responsible ownership / ESG a key differentiator (AFM company wide) Vote all* shares at AGMs / EGMs (AFM company wide) Diversity, equality & inclusion engagement policy (AFM company wide) Sustainable property strategy (AFM company wide) Integrates ESG factors into all / most fund research SDG aligned aims / objectives (AFM company wide) In-house diversity improvement programme (AFM company wide) Senior management KPIs include environmental goals (AFM company wide) Invests in newly listed companies (AFM company wide) Invests in new sustainability linked bond issuances (AFM company wide) Offer unstructured intermediary sustainable investment training ResourcesIn-house responsible ownership / voting expertise Employ specialist ESG / SRI / sustainability researchers Use specialist ESG / SRI / sustainability research companies ESG specialists on all investment desks (AFM company wide) Collaborations & AffiliationsPRI signatory UKSIF member Climate Action 100+ or IIGCC member UN Net Zero Asset Owners / Managers Alliance member GFANZ member (AFM company wide) TNFD forum member (AFM company wide) Investment Association (IA) member AccreditationsUK Stewardship Code signatory (AFM company wide) PRI A+ rated (AFM company wide) Engagement ApproachRegularly lead collaborative ESG initiatives (AFM company wide) Encourage responsible corporate taxation (AFM company wide) Engaging on climate change issues Engaging with fossil fuel companies on climate change Engaging to reduce plastics pollution / waste Engaging to encourage responsible mining practices Engaging on biodiversity / nature issues Engaging to encourage a Just Transition Engaging on human rights issues Engaging on labour / employment issues Engaging on diversity, equality and / or inclusion issues Engaging on governance issues Engaging on mental health issues Engaging on responsible supply chain issues Company Wide ExclusionsReview(ing)carbon / fossil fuel exposure for all funds (AFM company wide) Coal exclusion policy (group wide coal mining exclusion policy) Coal divestment policy (AFM company wide) Controversial weapons avoidance policy (AFM company wide) Tobacco avoidance policy (AFM company wide) Fossil fuel exclusion policy (AFM company wide) Climate & Net Zero TransitionEncourage carbon / greenhouse gas reduction (AFM company wide) Net Zero commitment (AFM company wide) Working towards a ‘Net Zero’ commitment (AFM company wide) Carbon transition plan published (AFM company wide) ‘Forward Looking Climate Metrics’ published / ITR (AFM company wide) Carbon offsetting – do NOT offset carbon as part of net zero plan (AFM company wide) In-house carbon / GHG reduction policy (AFM company wide) Publish 'CEO owned' Climate Risk policy (AFM company wide) Net Zero - have set a Net Zero target date (AFM company wide) Voting policy includes net zero targets (AFM company wide) Committed to SBTi / Science Based Targets Initiative TransparencyPublish full voting record (AFM company wide) Publish responsible ownership / stewardship report (AFM company wide) Full SRI policy information on company website Full SRI policy information available on request Paris Alignment plan publicly available (AFM company wide) Net Zero transition plan publicly available (AFM company wide) Sustainability transition plan publicly available (AFM company wide) |
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PolicyThe AXA Ethical Distribution fund invests in UK equities, in accordance with AXA IM RI sectorial policies and ESG standards as well as its ethical screening criteria in order to remove less or unethical securities from the investable universe. It additionally invests in UK government bonds (gilts), including index linked gilts, and cash.
We automatically apply AXA IM RI sectoral policies to address ESG tail-risks, which include:
In addition, we also apply the AXA IM ESG standards which are focused on:
The 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.
We also closely monitor the ESG scores of invested companies. A portfolio manager must submit a written justification of any decision to hold stocks with an ESG score below the agreed minimum level. A review of these submissions is carried out twice a year.
Specifically, the fund has in addition strict ethical screening criteria on the equity portion defined by the investment team and implemented by a 3rd party specialist provider.
The fund invests in shares of UK companies whose products, services or method of operation do not involve, conduct or carry out:
Eligible shares in companies are then selected based upon their prospects for future growth in dividend payments following an in depth analysis of their financial status, quality of business model and corporate governance arrangements.
Collaboration with AXA IM’s Responsible Investment team and the Quant Lab, provides valuable extra-financial analysis and the ability to identify both ESG risks and opportunities within the portfolio. Besides, granular ESG and voting reporting is published on our Fund Centre, and detailed information on the broad ESG approach at company and fund level is provided.
The resulting fund incorporates environmental, social and governance factors. |
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ProcessThe investment process is driven by both top-down macro analysis and bottom-up stock selection, and benefits from the specialist skill and collective knowledge of the investment team. The portfolio managers are ultimately responsible for all investment decisions.
The AXA Ethical Distribution fund offers a long-term perspective on investing in financial markets. Please see below the three steps of the process:
Step 1: Top-down research and strategic asset allocation The investment process begins with the top-down macro research and analysis on the likely influences at play in relation to the sector or business area of which a stock is part. With key inputs from the in-house Macroeconomic Research team of 13 experienced economists, our macroeconomic analysis considers factors that may influence performance, such as:
The Macroeconomic Research team uses a range of internally developed, proprietary models to produce its views on fixed income and equity markets. The team’s approach combines both quantitative and judgmental elements. Through their original perspectives, analysis and recommendations, they bring valuable inputs to our investment process. Investment managers regularly share knowledge and ideas with the Research & Investment Strategy team to attain the most optimal investment decisions. Their inputs are fundamental in the fund managers’ asset allocation decision and their work is fully independent.
Once the forward-looking macro outlook is determined, the portfolio managers review the strategic asset allocation for the fund. Asset allocation between equities and bonds is a dynamic process, although we have remained reasonably steady and consistent in our approach over the years.
Step 2: Security selection Once the decision on the asset allocation has been made, the team delegates the fixed income carve-out to our Sterling Fixed Income team (Mark Healy & Nick Hayes), whilst the equity portion of the portfolio follows our equity investment philosophy.
Top-down Thematic/Business Drivers & Bottom-up stock analysis We consider top-down secular growth themes and business drivers in order to identify trends that are likely to drive market growth over the medium-term, and thereby provide an economic ‘tailwind’ for the companies we choose to invest in. We try to identify and focus on those companies that are likely to be beneficiaries of this positive backdrop. How well-positioned companies are to benefit from these trends is a key consideration in assessing their potential. Current thematic drivers identified include:
The investment process focuses primarily on bottom-up fundamental analysis, combining in-house analysis, company meetings and external research. Fundamental analysis is undertaken by the dedicated AXA IM Equity team and drives stock selection, with valuation central to the decision-making process. Some of the key attributes that the team is looking for include:
A critical aspect of the manager’s fundamental research is meeting with company management. This first-hand information and insight is very important in the analysis process as it allows the manager to effectively test the quality of the company’s leadership, scrutinise the quality of the business franchise and evaluate management’s strategy for growth. Meetings with management must fully validate the Fund manager’s initial views and investment reasoning.
Valuation is key Ultimately, every investment decision taken by the fund manager is considered in the context of the potential for growing income with some prospects for capital growth, relative to the price paid. To ensure we do not overpay, each prospective company is subjected to a full evaluation of its financial and operational structure in conjunction with its prevailing market value. Using quantitative analysis, the manager focuses principally on absolute valuation, supplemented by relative valuation – a multitude of valuation methods including earnings yield and growth, dividend growth, free cash flow yield, return on capital and price/earnings ratio.
Ethical Screening Holdings in the equity sleeve of the AXA Ethical Distribution Fund are screened by a third party, currently Sustainalytics. Stocks will only be held where companies’ products, services or method of operation do not involve, conduct or carry out:
2.2 Bond selection Initially, the Fixed Income investment committee (the Forecasting Group) comprising AXA IM’s Fixed Income team, the Macroeconomic Research team, the Credit Research team and Portfolio Engineering Group meet regularly and make recommendations formalised in the Active Strategy Sheet. Factors such as the health of the UK and global economy, inflation and interest rate expectations, as well as market specifics such as bond issuance, are carefully considered to determine short-term tactical over, or underweight positions.
Our fixed income managers also take duration, curve, break-even curve, inflation arbitrage etc. into account to determine the choice of securities and instruments, best suited to the fund’s active strategy. Valuation is a key focus, with analysis of historical and forward-looking index-linked yields, relative to the real growth rate of the economy, forming an important element of gauging value in the index-linked bond market.
As far as issues selection is concerned, the funds have exposure to UK gilts, mainly index-linked bonds in particular. With both the income and capital value at redemption directly linked to the change in the RPI or CPI – and guaranteed by the British Government – index-linked gilts continue to offer stable, real returns, regardless of the prevailing economic conditions. Furthermore, index-linked gilts also serve as an effective risk diversifier to the overall portfolios, due to their long-term low correlation with other major asset classes, particularly during times of market uncertainty and high volatility.
Step 3: Portfolio construction The aim of the portfolio construction is to create a diversified portfolio reflecting the bottom-up security selection approach within a strong risk framework. The AXA Ethical Distribution Fund has a 60% hard limit to UK equities. Within the equity sleeve, every investment decision taken by the manager is considered not only in the context of the potential return of an individual holding, but also the effect that it will have on the diversification and risk exposures of the overall portfolio. The portfolio typically holds between 50 and 70 stocks from across the UK market capitalisation spectrum, depending on market conditions.
With regards to our “sell discipline”, if the original reason for a stock purchase no longer applies, the stock is then considered as a potential sell. This can be based upon a variety of factors, including, but not limited to, there being a threat to the balance sheet, a risk in the business, a change to management, a product failure, etc. Whilst a company may still be retained if there is scope for corporate activity, the opportunity cost of continuing to hold a disappointing investment is constantly borne in mind to ensure the best opportunities are being pursued at all times.
The bond allocation is constructed with the objective of dampening the volatility of the overall mandate whilst generating positive incremental income and returns. It is based on the following investment principles:
The equity investment team meets regularly with the fixed income team to share ideas and debate on the different views on bond markets. The duration of the bond portfolio will depend on the analysis of the economic cycle and the likely trend for interest rate movements. Risk diversification is a key aspect of the overall portfolio in order to efficiently protect the downside and limit risk, therefore the bond component will aim to have a low correlation with equities.
For the portfolio construction and risk oversight, the portfolio managers benefit from the active support of the Core Investment Analytics (CIA) team.
Continuous risk management The investment process is an interactive one that continually tests whether the original thesis for including a stock in the portfolio still holds. Companies are continuously monitored, with valuations, growth outlook and risk profiles reviewed in accordance with current market/sector themes and news flow.
Portfolio reviews and disciplined risk management are core to our investment approach and fully embedded within our investment process. The monitoring of portfolio exposure is continuously operated by the portfolio managers with the support of the CIA team:
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Resources, Affiliations & Corporate StrategiesExternal 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:
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:
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:
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LiteratureDisclaimer 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. Last amended: 31/10/23 09:54 |
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05/04/2024