AXA Hong Kong is carefully monitoring the social impact of its investment allocation changes as it aims to reduce its carbon footprint by 20% come 2025.
The Hong Kong life insurer will not blindly divest from non-ESG assets just to meet the emissions reduction target, but will review the impact of its investments holistically on the environment and social development.
Its Chief Investment Officer Richard Chan said that as the global economy recovers from the pandemic, AXA Hong Kong is cautious of a rebound of carbon emissions in its portfolio and is preparing for more aggressive allocation adjustments if needed.
The company, which manages US$25 billion of assets at the end of March 2022, has the same carbon-reduction target as its parent AXA Group, which is to reduce the carbon footprint of its general account assets by 20% between 2019 and 2025.
This is in line with the targets set by the Net-Zero Asset Owner Alliance, whose members have committed to transitioning their investment portfolios to net-zero emission by 2050.
To achieve these targets, AXA Hong Kong uses an investment strategy that has both organic and inorganic elements.
Chan said, “Organic means whenever we have new money or coupon of maturities, we can bias towards the best (asset) within the sector. So, we try not to have a skewed distribution by sectors, but instead within each sector, we try to invest in the best among available companies.
“But at the same time, due to asset-liability management or accounting reasons, from time to time, we will rebalance our investment portfolio. For example, we may want to – purely for duration gap management – sell some short-dated bonds and invest in long-dated bonds. So, we also take the opportunity of those rebalancing to increase the green assets and reduce carbon footprint in our portfolio,” he said.
As of the end of 2021, the Hong Kong portfolio has been slightly ahead of the linear reduction target set out each year. “I really believe we will reach or outperform the 20% target before 2025,” Chan said, according to Asian Investor.