AXA Net Zero strategy for investment & underwriting
AXA is committed to transitioning its insurance, reinsurance and investment portfolios to net-zero greenhouse gas (GHG) emissions by 2050, consistent with a maximum temperature rise of 1.5°C above pre-industrial levels by 2100.
For the first time, AXA announced concrete interim targets to contribute to the global economic climate transition for its most material underwriting commercial and retail motor portfolios, in addition to its investments targets. This is a further step in our global climate ambition, a journey that we started many years ago.
These targets demonstrate our determination to pursue our commitment towards climate change. The indicators in our Climate and Biodiversity report indicate the progress made, but also the efforts that are still required in terms of access to data, strengthening measurement and modeling methodologies, and the importance of accelerating the pace of the transition. As insurers, we see the increasing risks that climate change and the loss of biodiversity pose to our economies and societies, and how they are intensifying. We will continue engaging with our clients and our stakeholders leveraging all the levers at our disposal, from prevention to investment, from the financing of scientific research to insurance, as well as partnerships and collaboration with private and public players.
AXA’s objectives, specifically for the global P&C underwriting business, encompass three areas:
AXA’s current P&C underwriting policies will also continue to be applied and refined to match AXA climate transition efforts as well as our strategic ambition.
With these new announcements we move forward on our net zero transition journey.
These announcements are possible due in part to the methodological work undertaken within the sector. AXA was a significant contributor to the development of these tools and methodologies for companies to measure and disclose greenhouse gas emissions associated with insurance and reinsurance underwriting portfolios, as well as the protocol for setting underwriting transition ambition.
From now until 2026, AXA will be engaging with our top 200 largest commercial clients globally, to increase their knowledge about climate impacts, transition efforts and associated risks as well as sources of emissions, solutions, and the benefits of disclosure. We are conscious that commercial clients are not all facing the same challenges with global climate transition efforts, and one role of AXA is to help by engaging to understand their unique risks and needs with regards to the climate transition. Engagement approaches with agents and brokers as well with retail motor clients will also be adopted.
Moreover, in the same time frame (by 2026), AXA will strengthen its offers & services to “insure” the transition, namely by increasing its support for renewable energy installations and infrastructure and by expanding sustainable claims management options and other climate transition products, including nature-based solutions. We are aiming to increase our green and sustainable claims by 10% and retail customers will also benefit from education efforts on sustainable mobility and the electric vehicles transition more broadly.
These activities support the Group intermediate targets for the most material commercial and retail motor portfolios of AXA, by 2030:
We want to be an enabler and a supporter of the transition and we are taking concrete actions to drive the broader ecosystem in support of transition efforts.
We want to lead by example but the whole real-economy needs to follow suit: AXA’s underwriting emissions reduction objectives reflect an optimistic-yet-possible view of real economy efforts for a stable and just transition. Achieving these interim targets depends on a number of variables. In particular:
In this regard, measurement and disclosure is a key step in achieving emissions reductions: our efforts to measure underwriting portfolio emissions are limited by the disclosure efforts of the real economy. Until this improves, actions and ambition are limited where only proxy data is available. The intermediate transition targets have been set on a limited scope of AXA’s underwriting portfolio and only include client’s Scope 1 and 2 emissions. It is possible in the future that additional portfolios may be included and scope 3 GHG emissions integrated.
Moreover, as highlighted above, a significant gap currently exists between policies and science. Policy gap analysis highlights the widening divide between agreed 1.5C pathways and the estimated impact of currently funded policies.
Despite the known challenges and limitation AXA is taking the first step for its P&C underwriting portfolios. In doing so, we are also calling for collective action to embark all stakeholders on this journey.
This is an investment for the next generation and AXA, as we deliver value to our clients and partners.
AXA is committed to transitioning its investment portfolio to net-zero greenhouse gas (GHG) emissions by 2050, consistent with a maximum temperature rise of 1.5°C above preindustrial levels by 2100 and taking into account the Intergovernmental Panel on Climate Change (IPCC) transition pathways.
In 2019, AXA committed to reducing the carbon footprint of its general account investments by 20% between 2019 and 2025. This objective was met, and exceeded, with a reduced carbon footprint of 35% at year-end 2022. Following this successful first phase of AXA’s investment decarbonization plan, on 29 June 2023 the AXA Group established a new intermediate target on investments to reduce the carbon footprint of its General Account assets by 50% by 2030 (using the baseline year 2019).
The measure used to calculate AXA’s carbon footprint is carbon intensity normalized with enterprise value and using Scope 1 and 2 greenhouse gas data (according to the GHG Protocol). The asset classes covered are listed equities and corporate bonds as well as real estate, consistent with the approach adopted by the AXA Group with its first intermediate target.
The use of a carbon intensity normalization with enterprise value to measure carbon intensity allows a close link to the financing sources of the corporates and hence to our role as an investor. It also allows an easy comparison among asset classes, portfolios and sectors, compared with other metrics such as revenue or physical intensity.
Carbon intensity is expressed in tons of CO2 equivalent by million of euros invested. This means that we are aiming to reduce the carbon intensity of our combined portfolio of listed equities and corporate bonds complemented by real estate, from 66tCO2 equivalent per million euros invested in 2019 to 33tCO2 equivalent per million euros invested by 2030, which is in line with the trajectories prescribed by the IPCC and will mean us remaining highly selective in the years ahead. At the end of 2022, our portfolio came out at 43tCO2 equivalent per million euros invested - a reduction which reflected both our portfolio management efforts and the fall in scope 1 and 2 emissions from the companies in which we invested. We expect this to continue as we move into the second phase of AXA’s decarbonization plan.
Additionally, within our investment decision framework, AXA Group will reinforce its engagement with listed corporates contributing the most to its portfolio’s carbon footprint, focusing first on 20 listed companies among these largest contributors.
We want to lead by example but the whole real-economy needs to follow suit: AXA’s reduction objectives reflect an optimistic-yet-possible view of real economy efforts for a stable and just transition. Achieving these new intermediate targets depends on a number of variables. In particular:
In this regard, measurement and disclosure is a key step in achieving emissions reductions: our efforts to measure investment portfolio carbon intensity are limited by the disclosure efforts of the real economy. Until this improves, actions and ambition are limited where only proxy data is available. It is possible in the future that additional assets may be included and scope 3 GHG emissions integrated.
* IAE represents Insurance-Associated Emissions as defined by the absolute carbon accounting standard published by the Partnership for Carbon Accounting Financials
** Commercial IAE values based on client Scopes 1 and 2 emissions
*** “Net Zero by 2050: A Global Roadmap for the Global Energy Sector”; IEA: May 2021 and SBTi sector guidance
**** “World Energy Outlook 2022”; IEA; October 2022
***** IPCC Special Report on Global Warming of 1.5°C and IPCC Sixth Assessment Report (AR6)