AXA Climate Report 2020: “What’s not measured cannot be managed”

Why does AXA publish a report on climate?

We believe that what’s not measured cannot be managed. So, this report is essential if we want to assess the impact of our strategy for combatting climate change and have a constructive dialogue with all our stakeholders on this issue. The report presents our strategic milestones in the fields of insurance and investment, but also our connected activities, such as the work being done by the AXA Research Fund and our partnerships. In addition, it sheds light on the context in which we are evolving, particularly the regulatory environment, which is always changing.

How is the report designed?

It is the result of a collective effort that mobilizes in-house experts at AXA for a period of several months. A number of teams contribute, under the coordination of the Group’s Corporate Responsibility team – such as the investment and risk management departments, as well as the public affairs department, our asset management subsidiary, AXA IM, and AXA XL, our large risks subsidiary.

In writing the report, we are guided by French regulatory requirements, the “Article 173”, and the framework drawn up by the Taskforce on Climate-Related Financial Disclosures, of which we are a member. We also use innovative techniques, like the calculation of the “warming potential” of our investments, which measures the impact of our investments on the climate using a model developed by a Swiss Fintech, Carbon Delta, which was recently acquired by MSCI. This model analyzes the gap between the COP21 commitments and the carbon budget, i.e., the CO2 emissions quota that will allow us to stay within the 1.5°C increase in temperature required by the Paris Agreement, as well as the business mix of companies.

Are these methodologies reliable?

We are working with indicators that did not exist three years ago. Their continuous improvement is part of the larger revolution in corporate commitment around the climate. At the risk of becoming obsolete very quickly, they must evolve and incorporate new factors. There is still a great deal of heterogeneity in the methods used to make calculations of this type. When we look at the climate reports published by other companies, it is difficult to compare the data. Eventually, we’ll need a common set of benchmarks and metrics.

In fact, this is why we joined the Net Zero Asset Owner Alliance, a global group of investors that have made a commitment to transition their portfolios to “net-zero” carbon neutrality by 2050. Via this group’s action, we have set principles designed to encourage the convergence of methodologies toward a shared set of ambitions and advance the cause of combatting climate change.

What are the highlights of AXA’s 2020 Climate Report?

The most important takeaway is that our strategy is bearing fruit. At the end of 2019, the warming potential of AXA’s investments was 2.8°C, a slight decline compared to 2018, 3°C, and, above all, below the market average, 3.6°C. The carbon footprint of our investments also fell by 31% between 2014 and 2019. Even though we still have a lot to do, these are encouraging signs.

In addition, in this year’s report, we have delved deeper into the impact and climate dimension of our insurance activities. We tackle risk modeling, our insurance responses with the solutions offered by AXA XL, AXA Climate and our work on the prevention of natural disasters, and the evolution of regulations that are underway at the European Union level.

Does the current context – an economic crisis following a public health crisis – call AXA’s ambitious approach to the climate into question?

This crisis has not made us waver in our climate-related convictions at all. In fact, it has only made them stronger. We are convinced that a genuinely sustainable economic recovery must be a green recovery. This is why AXA CEO Thomas Buberl has taken the helm of a taskforce linked to the World Economic Forum (Davos) formed to help finance the European "Green Deal," launched just before the crisis began. We are also recommending that the climate indicators explored in our report be used to redirect the flow of capital to the low-carbon models we currently need. This issue is discussed in the opening pages of the report by Alban de Mailly Nesle, AXA Group’s Chief Risk and Investment Officer.