AXA IM’s voting policy: Five key questions

How does voting fit within your responsible investment strategy?

Our aim is to play a leading role in financing the transition to a greener and more sustainable world. Part of that involves encouraging companies in their transition journey through focused shareholder engagement. This is a central pillar of responsible investment at AXA IM, and we therefore continuously review ways to make this dialogue as efficient and impactful as possible. There are three essential ways to do this: clear objectives communicated to management; regular meetings to verify and evaluate progress and voting with conviction or pursuing other escalation techniques when required. Our active dialogue with companies allows us to effectively monitor our investments, and ensure we maintain open channels which can enable change to the benefit of society, the planet – and ultimately our clients.

Escalation is an essential part of this process. The use of our voting rights at annual general meetings (AGMs) enables us to convey clear and strong messages to management teams, informed by our research and the progress of engagement with a company. We believe targeted voting can help us fulfil our promise to clients to act as an effective steward of their assets, leveraging our considerable size of aggregated assets under management to reinforce a shared message. We believe investors are most effective in this when the momentum is collective and consistent. Right now, with the role of the finance industry in the transition under scrutiny by policy makers and regulators, we think that dispersing voting decisions widely through potentially hundreds of investors could risk diluting the considerable influence of the asset management industry, as well as detaching voting from the engagement process.

Our ability to vote with purpose and scale comes with responsibilities – our research must be exacting, our stewardship policies and governance must be robust, and our actions must be transparent. In addition to disclosures at entity and fund level, which are already in place, we are taking additional steps in 2022, providing additional transparency on a number of our engagement activities, and striving to provide educational content to our stakeholders. 

What are the key principles of your policy and what makes it different?

Our voting policy and the way it is applied is, in our view, quite distinct and driven by values at the core of each decision.

Voting is one of the tools we have at our disposal to interact with issuers, and to accompany them in their sustainability journey. Our approach is to seek a holistic view which gives individual companies room to pursue improvements where we deem it necessary. Therefore, even if a company’s actions or strategy appear to fall foul of general principles of good corporate governance, our voting policy will take into consideration specific circumstances. These include for example, geography, company size, market capitalisation, the extent of our holdings, and most importantly, the status of ongoing engagement with the management and directors of the company concerned. Our voting decisions are guided by regular dialogue that seeks to understand a company’s business, the sector in which it operates and the idiosyncratic challenges it faces. We believe this approach allows us to better identify where we might encourage potential beneficial change in an investee company, and action upon these opportunities.

We embed our convictions around environmental, social and governance (ESG) issues in our voting policy, which is reviewed on an annual basis. The general principles of our voting policy are as follows:

• Analysis of resolutions: At AXA IM, we always seek to vote in an informed manner. Each resolution put to the vote is analysed on a case-by-case basis by the members of the Corporate Governance team. This internal analysis is supported by our dialogue with investee companies, as well as by research from proxy advisors, such as Institutional Shareholder Services (ISS) and Proxinvest. Although we use the ISS platform for voting, we review resolutions according to the principles included in our voting policy.
• No abstentions: AXA IM aims to vote ‘for’ or ‘against’ a resolution, only abstaining in rare cases, guided by exceptional circumstances.
• Support for management: As a transition leader, we aim to support the companies in which we invest in, by voting with management unless we believe a substantial issue has arisen, or when a pre-defined limit has been crossed. When we have concerns about the transition journey of a company implied by its day-to-day practices, we will pursue a vote against management, supporting shareholder resolutions or even co-filing them. If we take this route - as an additional lever to drive effective change - we will seek to engage with the company ahead of its AGM.
• Engagement: In the event of a resolution that is contrary to our policy, to our standards of good governance, or to the protection of the long-term interests of shareholders, we will seek to engage with the company before voting against a resolution. This will be on a best-efforts basis, dependent on several factors, including the severity of the ESG risk inherent in the resolution and the significance of our holdings. This philosophy is guided by the idea of highly focused voting, as part of a policy that gives a major role to engagement with companies. We believe in dialogue, and we will seek to inform companies of any potential vote against management in advance, and the reasons for that vote. For companies where we are not involved in an engagement process, we will inform them of our voting intention on a best-efforts basis.
• Integration of  environmental and social issues: We believe these issues are fundamental to the conduct of business and should be addressed at the highest level of the company, which is why these issues are commonly discussed in the context of engagements with invested companies. This is also why we have decided to integrate these issues into our voting policy and approach - to push companies to be increasingly vigilant about the potential environmental and social risks and opportunities which will affect them. See below for more details.

What are the key changes in our policy for 2022?

In 2022, we are continuing to embed our ESG convictions throughout our voting policy with several updates which we believe reflect changes in society as well as in the corporate world. In our view, environmental and social matters cannot be addressed in isolation – they need to be integrated into the governance, strategy and target-setting of investee companies. This is why we will continue to reinforce the integration of ESG views in our assessment of ‘traditional’ resolutions, particularly those set out below:  

• Board Governance: We review directors’ ESG skills to ensure that the board can effectively oversee and manage ESG-related risks and opportunities
• Remuneration: We monitor the inclusion of ESG elements in executive remuneration, pushing companies to add tangible, pertinent, meaningful key performance indicators (KPIs)
• Corporate reporting: We push for the adoption of robust extra-financial disclosures aligned with the Task Force on Climate-Related Financial Disclosures (TCFD) for material sectors

In addition, we will continue to reinforce our climate stewardship approach, particularly for sectors at stake.

For the oil and gas sector specifically, we will engage with a selection of companies based on clear objectives and a specific timeframe, with the objective of ensuring they develop credible transition plans consistent with the goals of the Paris Agreement and are on track in their delivery. We will also seek to ensure that their current operational practices aim to mitigate negative impacts on the environment.[1]

We recognise that among fossil fuel companies there will be significant variations in maturity at the moment, due to geographic and business specificities. We will therefore define bespoke timeframes to achieve the engagement objectives listed above for each of the companies with which we engage, seeking ambitious but realistic goals. Overall, we expect them to comply no later than in 2025, disclosing progress on their pathway in the meantime. If a company does not deliver on the defined timeframe, we will use escalation techniques which may include voting against the Board from 2023.

How do you approach ethnic and gender diversity?

At AXA IM, we have a long-standing commitment to drive diversity in our investments as we believe shareholder interests are best served by diverse and inclusive companies. Diversity at board level, in top management and throughout the wider workforce can help overcome ‘group-think’, can trigger debates and innovation and can foster employee engagement, in our view.

To this end, in 2020 we have enhanced our gender diversity voting policy in developed market economies where women do not make up at least one-third of the board, and have launched and co-chaired the 30% Club France Investor Group to improve women’s representation in senior executive teams in the French market.

Beyond gender diversity, we believe that a diversity of origins, ethnicities, and social backgrounds is also important. In the context of the Black Lives Matter movement, a new type of shareholder proposal has emerged requesting companies in North America to conduct an independent racial equity audit, and we recently strengthened our approach to increase our level of support on ethnic diversity-related proposals. At the board level, we will also vote against the re-election of the Nomination Committee Chair at large-cap companies in the US and UK where there is no ethnic representation on the board.

As a consequence of this, we will reinforce our ongoing engagement with companies on the topic of racial and ethnic diversity, at board level and across the organisation. For other markets, particularly in continental Europe, while we acknowledge the cultural and legal challenges facing the collection of ethnicity data, we believe it does not prevent companies in those markets from tackling diversity and inclusion on their board, among top management and in the wider workforce through the lens of socio-economic backgrounds or country of origin. As part of our ongoing dialogue with investee companies, we will encourage them to implement diversity and inclusion policies to foster diversity beyond gender at all levels of the organisation.

How do you approach environmental and social resolutions?

In recent years we have seen an increase in the number of environmental and social resolutions – whether presented by management or shareholders – as a means to emphasise the increase in concern about potential impacts.

AXA IM’s approach to environmental and social resolutions is to carefully analyse each proposal on its own merits. We believe that it does not always make sense to support such shareholder resolutions if they are not well targeted for the company in question or fail to acknowledge efforts and commitments that are in progress or in slightly different forms.

We have a clear stewardship approach which frames how we decide whether to support ESG resolutions:

• Define the policy approach: We disclose publicly our policy to support shareholder resolutions that seek improved reporting, practices, and disclosure on a range of climate-related issues
• Review company practices, disclosures and commitments: We look at how the company is handling ESG issues from a governance point of view. This would include the board’s understanding of the main ESG risks and opportunities facing the company, how pay is tied to material ESG issues, whether the company discloses an action plan to address ESG-related concerns, and what commitments have been made over what timeframe. In addition, we look at broader disclosure practices by the company as well as its role in industry associations which might pursue policies that go against our stance on ESG issues
• Understand the rationale: We will closely examine proposals put forward by shareholders, particularly looking at the actions they hope to see the company take and what outcomes they hope the company will deliver. We will also assess whether the request is overly prescriptive
• Consider the long-term impact and implication: When reviewing shareholder resolutions – including whether to co-file on resolutions – we consider the impact that we believe the proposed resolution will have on the long-term sustainable future of the company

[1] Refer to AXA IM Climate Risks policy for details on our engagement policy with Oil & Gas companies