Investissement responsable

Social climbing: ESG investors get their heads around social risks


 

Covid-19 has brought out the best and the worst of the corporate world. Carmakers are producing ventilators, and consumer firms are making hand-cleaning gels. Some others, though, have drawn complaints for their treatment of their employees during the pandemic.

Such considerations touch on what sustainable investors call “social” risks, part of the environmental, social and governance (ESG) basket of factors that has grown popular in recent years. Climate change and corporate scandals have led investors to focus on the “E” and the “G”. The pandemic brings the “S” into the limelight.

Social issues can range from the impact of demography on a firm to its relations with the local community. Moody’s, a rating agency, says that $8trn of the debt it rates is exposed to social risks—four times that exposed to environmental ones.

Read more: COVID-19: Stewardship and the pandemic

Some investors use social factors in the hope of improving the world: these invest in small listed firms, such as educational outfits, or in private projects. Others do so to improve returns. But there is little consensus on which social risks matter. A green asset manager can assess a firm’s carbon footprint; few gauges exist for socially minded investors. One exception is employee satisfaction, which studies link to a company’s performance. But a focus on that alone can lead to perverse outcomes, by simply giving greater weight to companies with relatively few employees. A recent study by Vincent Deluard of INTL FCStone, a broker, found that ESG-focused funds did precisely this.

Other social factors, such as a company’s culture, are harder to quantify. As a result, ESG-rating firms rely on inputs rather than outputs to calculate their scores, says George Serafeim of Harvard Business School. Instead of measuring gender balance, for instance, they ask if firms have a policy on diversity. Of the 61 questions underlying one rating firm’s social score, 24 look at whether companies have a specific policy or code of conduct.

Whizzy data analysis might fill the gap. Thinknum Alternative Data, a research firm, looks at online reviews of companies written by staff members. Before employees at Wells Fargo, a bank, were found to be setting up fake customer accounts, they were complaining about having to do so. RepRisk, another data firm, analyses news articles and think-tank reports. Its risk ratings for Johnson & Johnson, Purdue Pharma and Teva Pharmaceuticals were already high in 2017, before America’s opioid crisis hit the headlines. All have since been sued for allegedly playing down the risks of prescribing opioids.

Read more: We must not sacrifice the environmental crisis just to resolve an economic one

A third data firm, Truvalue Labs, assesses the sentiment of news coverage. Using this, Mr Serafeim and researchers from State Street, an asset manager, found that positive coverage of a company’s response to covid-19 was linked to smaller-than-average subsequent declines in stockmarket returns in February and March, controlling for size and industry.

The rigour is helpful, but the challenge will be showing that such data can be consistently useful for investors. New social risks will arise as lockdowns end—for instance, relating to how companies make offices covid-proof. Plenty still to keep the number-crunchers on their toes.

Read more: The pandemic's gender bias needs urgent fixing

 

© [June 2020] The Economist Newspaper Limited. All rights reserved. From The Economist, published under license. The original article can be found here.

 

Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX.

In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

Investissement responsable

COVID-19: Stewardship and the pandemic

Responsible investment in 2020 was meant to be all about starting the Transition Decade to a low-carbon future. The asset management industry would build on the mainstreaming of environmental, social and governance (ESG) considerations and climate change into investment strategies – and AXA IM would seek to lead from the front. The shock of the COVID-19 pandemic may have shaken things up, but it has only served to strengthen those trends.

This virus has forced a reckoning throughout the world, putting stress on economies and livelihoods alike. As we publish our 2020 H1 Stewardship Report, there are signs that we are emerging from the first wave of this unprecedented moment, and we can make some initial observations about where we find ourselves.

A key conclusion we’ve reached is that our thematic ESG convictions have become even more relevant in the pandemic. Our research and engagement around climate change, biodiversity, human capital management and gender inequality, public health and corporate governance have adapted to explore how COVID-19 might change industries and alter ways that we might invest. This has included research on COVID bonds, carbon emissions in the lockdown, and the resilience of ESG leaders against laggards in the market downturn.

Read more: We must not sacrifice the environmental crisis just to resolve an economic one

Here was an opportunity for real-time testing of corporate sustainability, a chance to call on fellow investors to help deliver a ‘green recovery’ and to examine the development of new financial instruments that could both build resilience to the pandemic and embed sustainable practices into the future.

This research also bolstered our stewardship activities. The COVID-19 crisis has sharpened the importance of active ownership, particularly around certain crucial issues. We doubled down on some of our engagement activities around public health, human capital and shareholder rights. So too, our enhanced voting policy on core themes revealed our industry leadership on resolutions around gender diversity, climate change and board accountability.

As an active long-term fund manager, we had the agility and experience to respond quickly and meaningfully in this crisis, helped in part by the quality of our existing relationships with investee companies.

Read more: Endangered species may be yet another virus victim

Despite the lockdown, we engaged more than 180 issuers in the past six months and voted at about 4,300 shareholder meetings. AXA IM’s record of expressing our opinion and recommendations through engagement and voting is revealed over the following pages. We are only at the half way mark of 2020 and we have already seen a startling and generation-defining global crisis. But the pandemic will not press pause on the Transition Decade, and we know that climate change will steadily impart its own dramatic effects.

There is much work to do in the months that follow, on this and a host of other sustainability themes, but as we begin to understand what a post-COVID-19 world might look like, one thing is clear: Active, decisive, informed and responsible investors have never been more important.

Read more: The electric vehicle revolution could be a benchmark for the circular economy

Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX.

In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

 

Deux minutes

Deux minutes pour s’informer sur les marchés financiers

Que faut-il retenir ?

Le PIB japonais se serait contracté de 2,2 % au premier trimestre, d’après les dernières estimations officielles. L’investissement des entreprises s’est montré plus résilient que prévu, notamment du fait qu’elles ont investi dans les technologies et dans la recherche et développement afin de faire face à la pandémie. Pendant ce temps, en Europe, l’économie suédoise s’est repliée de 8,6 % au deuxième trimestre. Cette baisse est nettement moins importante que la chute de 11,9 % subie par l’ensemble de l’Union européenne et s’explique par la décision controversée du pays de ne pas confiner sa population. 

État du monde

La Banque d’Angleterre a amélioré ses perspectives entourant l’économie britannique lors de sa dernière réunion de politique monétaire. Elle a laissé ses taux d’intérêt inchangés à 0,1 %, précisant que la consommation repartait à la hausse. La banque centrale britannique table désormais sur une contraction de l’économie du Royaume-Uni de 9,5 % en 2020, soit un scénario nettement plus positif que le précédent (-14 %). En revanche, elle s’attend à une hausse importante du chômage. La Banque d’Angleterre anticipe par ailleurs une croissance de 9 % en 2021 et estime que l’activité ne reviendra pas à son niveau pré-2019 avant la fin de l’année prochaine. 

Le chiffre de la semaine

2 000 dollars

Le prix de l’or a, pour la première fois de son histoire, dépassé 2 000 dollars l’once la semaine dernière. Le métal précieux, souvent considéré comme une classe d’actifs refuges en période d’incertitude économique et de fébrilité sur les marchés, a vu sa valeur monter en flèche en réponse aux inquiétudes qui entourent la pandémie de coronavirus et l’escalade des tensions entre Washington et Pékin. 

Éclairage

AGA hybrides

Avec la pandémie actuelle, nombreuses sont les entreprises qui ont tenu des assemblées générales annuelles (AGA) hybrides cette année. Ces réunions organisées dans un lieu physique peuvent également être suivies à distance par les participants. Cette solution pourrait fortement se développer à l’avenir, en vue de favoriser la participation des actionnaires, notamment lorsque les entreprises comptent des investisseurs internationaux.

Prochaines échéances

Parmi les données économiques publiées cette semaine figureront lundi les chiffres de l’inflation, suivis, mardi, de ceux sur le chômage au Royaume-Uni et de l’indice du climat économique dans la zone euro. Les estimations préliminaires de croissance du Royaume-Uni au deuxième trimestre seront publiées mercredi, à l’instar des chiffres de l’inflation aux États-Unis et de la production industrielle au Royaume-Uni et dans la zone euro. La deuxième estimation de croissance dans la zone euro au deuxième trimestre est quant à elle attendue vendredi.

L’investissement sur les marchés implique un risque de perte en capital.
 
Ce document est exclusivement conçu à des fins d’information. Il ne constitue ni un élément contractuel, ni un conseil en investissement. Il a été établi sur la base d'informations, projections, estimations, anticipations et hypothèses qui comportent une part de jugement subjectif. Ses analyses et ses conclusions sont l’expression d’une opinion indépendante, formée à partir des informations disponibles à une date donnée.
 
Ainsi, compte tenu du caractère subjectif et indicatif de ces analyses, nous attirons votre attention sur le fait que l'évolution effective des variables économiques et des valorisations des marchés financiers pourrait s'écarter significativement des indications (projections, estimations, anticipations et hypothèses) qui vous sont communiquées dans ce document. En outre, du fait de leur simplification, les informations contenues dans ce document peuvent n’être que partielles. Elles sont susceptibles d'être modifiées sans préavis et AXA Investment Managers n’est pas tenu de les mettre à jour systématiquement.
 
Toutes ces données ont été établies sur la base d’informations rendues publiques par les fournisseurs officiels de statistiques économiques, et de marché. L’ensemble des graphiques du présent document, sauf mention contraire, ont été établi à la date de publication de ce document.
 
Les destinataires de ce document s’engagent à ce que l'utilisation des informations y figurant soit limitée à la seule évaluation de leur intérêt propre en considération des stratégies visées. Toute reproduction partielle ou totale des informations ou du document est soumise à une autorisation préalable expresse de la Société.
 
Rédacteur : AXA Investment Managers Paris – Tour Majunga – 6, place de la Pyramide – 92908 Paris La défense cedex. Société de gestion de portefeuille titulaire de l’agrément AMF N° GP 92-08 en date du 7 avril 1992 S.A au capital de 1 384 380 euros immatriculée au registre du commerce et des sociétés de Nanterre sous le numéro 353 534 50

Vues d’Iggo

Vue de marché. Avoir la foi.

 Summary

Forward markets don’t see US 2-year Treasury yields above 1% again for at least five years. The technology sector has just delivered blow-out earnings numbers for Q2. The change to economic behaviour delivered by the coronavirus is presenting new growth opportunities. It’s hard for the “naysayers” to accept but the strength of policy and the collective determination to recover has driven risk asset returns. Will threats to policy or recovery even be strong enough to overcome FOMO? So far, they haven’t. The “True Faith” market might continue for a while.   

  • Two powerful beliefs – Don’t fight the Fed or the FAANGS. The Fed is ready and willing to extend support for financial markets and the economy. The FAANGS have proved that it is possible to grow earnings as the online economy booms. Both are symbolic of what I believe are the two fundamental core faiths that we can derive from a stunning return from risk assets this last four months. The first is faith in the strength of the policy support for markets and the economy. The second is the underlying faith that we will defeat the virus and achieve economic recovery. There are lots of threats to both but to fully subscribe to a more bearish view, one has to make the argument that policy support will be less effective and the recovery will stall and lapse into a second downturn. Lastly, if you don’t fully buy my thesis or the alternative bearish view, there is always the FOMO explanation – with interest rates at zero there is a huge fear of missing out on returns even when things like a 33% decline in GDP are reported tell us the market shouldn’t be going up.
  • Policy remains the source of fuel for markets – It’s clear that policy has been quite effective. It has put a floor under activity, incomes and markets. Central bank credit and liquidity policies have allowed markets to remain orderly and for credit to flow. Banks have been supported, therefore cutting off the risk of a downward spiral of a credit crunch. Central banks have created fiscal space for governments to spend to support jobs. Large fiscal stimulus provides a potential base for a solid medium term recovery. Central bankers and politicians suggest more is to come if needed. The manifestation of this in markets is ultra-low yields which is the trade-off in the bond market for investors benefitting from capital protection and credit impairment. It should not be underestimated how much the policy commitment and the liquidity that goes with it has been responsible for the performance of markets. Quantitative easing, lower real interest rates and credit backstops have reduced systemic risk in a more convincing and rapid way than was ever the case in 2008. No wonder the market recovery has been quicker.
  • We want better – The second belief, whether explicit or unconscious, is that things will get better. In aggregate we don’t want to expect that the worst case outcome is the most likely (millions dead from coronavirus, economies devastated). Why? Because as a race we are pretty good at recovering. Pretty inventive and flexible. There is a belief that a vaccine will be found, that social distancing can control the rate of infection and that people want to get back to working and consuming. The data has evidenced recovery and looking forward there is a view that there is plenty of pent-up demand, that changing consumer patterns and business models can still be consistent with growth. Moreover, there is a realisation of the opportunities around digitalisation, carbon transition, basic human security (health, water, food) and a broad range of ESG factors. Collectively enough investment is driven by this inherent optimism or by the fear of missing out on higher returns than cash and bonds can deliver, to drive equity prices higher.
  • Constantly challenged – This is my observation of the world. These two beliefs, for now, appear to have cut off the left-tail of the distribution of outcomes and provide support for higher markets. There are nuances to how we look at both the policy belief and the growth belief, and that creates volatility. Betting against them, especially on the basis of short-term noise, is betting against a deep-rooted – if not universally shared - psychology. So what would one need to see to make those bets. Or more realistically, a series of bets. One bet might be to see enough in the news-flow to question how rock solid the two beliefs are. Data flow can impact sentiment and positioning and lead to market set-backs or much lower returns going forward. Another bet might be that either the policy environment changes markedly or the virus/growth environment deteriorates enough to really think about a significant growth and market reversal.
  • Risks, clearly. – What shakes the level of confidence, even if we don’t always recognise it, in the two pillars – the robustness of policy and the positive recovery outlook? In fact, this is what is discussed every millisecond of the day. Just turn on any financial news or read any market commentary and the debate is about what can go or is going wrong. Let’s think about some risks. To start with, the policy making process is likely to become marginally more constrained by balance sheet, deficit or political concerns going forward. Secondly, existing programmes might start to run off, creating economic risks (cliff-edges for consumers as income support is removed). Non-COVID-19 political dimensions such as the US election, China and Brexit might manifest themselves in investor actions to reduce risk. On the recovery side, this recent increase in infection rates in Europe might result of a second set of restrictions on economic activity, flattening the recovery curve and reducing growth forecasts again. Lastly, there could be disappointments in the vaccine development process. 
  • Fed still there – This week’s news provided a rebuttal to some of the bearishness. The Fed is not going to do anything to dilute its super-accommodative monetary policy and, indeed, could do more. That was the message from the FOMC. Two-year Treasury yields are currently at 12 basis points (bps), bang in the middle of the Fed Funds target range. The 5-year yield is just at the top of the range, at 24 bps. This means markets don’t really expect the Fed to raise rates for some time. If the Fed chooses to strengthen its forward guidance by some level of yield curve control it may need to continue to be a significant purchaser of bonds, maintaining a high level of liquidity provision from the central bank. 
  • And upside attainable – The earnings season has also rewarded the recovery belief. Of the 288 companies reporting at the time of writing, earnings announcements had beat estimates by 23% for the S&P500. Some of these companies were those that have benefitted from the surge in online consumption and service provision over the last four months or so. Others are those that will see opportunities from the roll-out of 5G technology. The household technology, online retailing and payments and social media massively beat earnings expectations.
  • Scenarios – Looking forward we can think about travelling along two axes in terms of how we look at markets and how the news impacts our views. The first is the policy axis – is policy support remaining in place or will it weaken? The second axis is the recovery – will the data on the virus and activity improve or deteriorate. The combination should help investors position themselves to the appropriate level of risk. A scenario of policy withdrawal and deteriorating news on the virus and the recovery is clearly the most bearish and would dictate reduced exposure to risk, increased exposure to cash and safer assets like duration and high quality credit. The most bullish would be that policy support remains robust and the data improves. That would sustain strong performance in equities and credit. Better data with some element of policy withdrawal might not be a bad scenario as it would point to a more sustained cyclical recovery, some increase in inflation and steepening of yields curves. Policy support remaining in place and the data deteriorating – a scenario we are potentially on the brink of – would also have a more bearish tilt, favouring credit over equities and curve flatteners. My own view is that the most likely scenario for the coming months is continued policy support and continued recovery.
  • A lot has happened already – The last word though has to be about expectations and valuations. Markets have come a long way since March. The surge in earnings for the online and technology giants might not be repeated, especially if and when more of the traditional economy opens up. Real yields might not fall that much further given that a lot of nominal yields have converged on the effective lower bound of policy. Markets are arguably priced for perfection. That also suggests they are sensitive to bad news, and August has seen some adverse market shocks in the past. I am taking two weeks holiday. That will be a good chance to reflect whether the twin pillars will remain standing in the final third of this traumatic year. Before then, I suspect I will be listening to New Order’s “True Faith” a couple of times (the line “The chances are we’ve gone too far, you took my time and you took my money” may turn out to be particularly poignant!)
  • Stay safe and have a good summer!

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Issued by AXA Investment Managers UK Limited which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales No: 01431068 Registered Office is 7 Newgate Street, London, EC1A 7NX. A member of the Investment Management Association. Telephone calls may be recorded or monitored for quality.

Information relating to investments may have been based on research and analysis undertaken or procured by AXA Investment Managers UK Limited for its own purposes and may have been made available to other members of the AXA Investment Managers Group who in turn may have acted upon it. This material should not be regarded as an offer, solicitation, invitation or recommendation to subscribe for any AXA investment service or product and is provided to you for information purposes only. The views expressed do not constitute investment advice and do not necessarily represent the views of any company within the AXA Investment Managers Group and may be subject to change without notice. No representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein.

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Investissement responsable

La pandémie mondiale de COVID-19 a perturbé la saison des votes en Europe

Executive summary

  • The global COVID-19 pandemic brought disruption to voting season across Europe, North America and Japan. Companies struggled to host in-person meetings, but many quickly moved to hold virtual AGMs, aided by technology. We believe that a hybrid system – where physical meetings are enhanced by full online capability – could boost shareholder participation, particularly for international investors.
  • The pandemic has forced many companies to ask themselves what they stand for beyond profit – what their ‘corporate purpose’ is and how this is integrated into every facet of business.
  • COVID-19 has also highlighted the importance of board oversight of management. Executives have been forced into quick decisions to cope with the short-term impact of the pandemic but thoughtful consideration must be given to the longer-term implications, and to the need to keep shareholders informed.
  • We expect two trends to gain prominence as we move past the crisis. First, a rise in employee activism, where staff take their companies to task on human rights, environmental issues, social concerns, and employee relations. Second, the question of pay ‘fairness’ as more companies disclose data on the ratio between CEO pay and median employee pay.

Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX.
In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

Investissement responsable

Investir avec une approche multi factorielle

 

Deux minutes

Deux minutes pour s’informer sur les marchés financiers

Que faut-il retenir ?

L'économie américaine s'est contractée de 32,9 % au deuxième trimestre sur une base annualisée corrigée des variations saisonnières, ce qui constitue un record. Ce chiffre est légèrement supérieur aux prévisions consensuelles, mais la persistance de la pandémie de coronavirus a suscité des inquiétudes quant aux perspectives pour le reste de l'année, les récentes statistiques ayant fait état d'une hausse des demandes d'allocations chômage par rapport à la semaine précédente. La Réserve fédérale a laissé les taux d'intérêt américains inchangés dans une fourchette de 0 à 0,25 % la semaine dernière et a déclaré que l'activité économique s'était redressée au cours des derniers mois, mais qu'elle restait bien en deçà des niveaux antérieurs à la pandémie. 

État du monde

Les bonnes nouvelles émanant de certaines des plus grandes entreprises américaines, qui ont annoncé des bénéfices supérieurs aux prévisions, ont dopé la confiance des investisseurs à l'issue d'une semaine marquée par des données économiques médiocres et la crainte d'une recrudescence des cas de coronavirus. Le PIB de la zone euro s'est contracté de 12,1 % au deuxième trimestre par rapport au trimestre précédent, soit -15 % en glissement annuel, sa plus forte baisse à ce jour. Parallèlement, le prix de l'or a atteint un niveau record la semaine dernière (près de 2 000 dollars l'once), les investisseurs privilégiant les actifs perçus comme des valeurs refuges. 

Le chiffre de la semaine

320 milliards USD

Selon l'Organisation mondiale du tourisme des Nations unies, la perte d'activité du secteur mondial du tourisme liée à la pandémie de coronavirus se monte à 320 milliards de dollars entre janvier et mai cette année, soit plus de trois fois plus que lors de la crise financière de 2008/2009. Dans un autre rapport, l'Association internationale du transport aérien a indiqué ne pas s'attendre à ce que le trafic mondial de passagers retrouve les niveaux antérieurs à la pandémie avant 2024, soit un an de plus que les projections initiales.

Éclairage

Hang Seng Tech 

Nouvel indice boursier regroupant les 30 plus grandes valeurs technologiques cotées à Hong Kong, lancé la semaine dernière. Il figurera aux côtés du principal indice Hang Seng, lequel est fortement dominé par les valeurs bancaires, énergétiques et immobilières, et il devrait renforcer l'intérêt des investisseurs pour les valeurs technologiques à Hong Kong tout en offrant aux jeunes entreprises technologiques un moyen plus attrayant de lever des capitaux.

Prochaines échéances

Les chiffres définitifs de la croissance du PIB japonais au premier trimestre seront communiqués lundi. Les PMI (indices des directeurs d'achats) manufacturiers de juillet du Japon, de la Chine, de la zone euro, du Royaume-Uni et des États-Unis seront publiés lundi, suivis mercredi des PMI des services et des PMI composites de ces mêmes pays. Jeudi, la Banque d’Angleterre dévoilera sa décision en matière de taux d’intérêt ainsi que son rapport de politique monétaire. Le solde commercial de la Chine et de l'Allemagne sera communiqué vendredi, ainsi que les chiffres de l'emploi non agricole et du chômage aux États-Unis.

L’investissement sur les marchés implique un risque de perte en capital.
 
Ce document est exclusivement conçu à des fins d’information. Il ne constitue ni un élément contractuel, ni un conseil en investissement. Il a été établi sur la base d'informations, projections, estimations, anticipations et hypothèses qui comportent une part de jugement subjectif. Ses analyses et ses conclusions sont l’expression d’une opinion indépendante, formée à partir des informations disponibles à une date donnée.
 
Ainsi, compte tenu du caractère subjectif et indicatif de ces analyses, nous attirons votre attention sur le fait que l'évolution effective des variables économiques et des valorisations des marchés financiers pourrait s'écarter significativement des indications (projections, estimations, anticipations et hypothèses) qui vous sont communiquées dans ce document. En outre, du fait de leur simplification, les informations contenues dans ce document peuvent n’être que partielles. Elles sont susceptibles d'être modifiées sans préavis et AXA Investment Managers n’est pas tenu de les mettre à jour systématiquement.
 
Toutes ces données ont été établies sur la base d’informations rendues publiques par les fournisseurs officiels de statistiques économiques, et de marché. L’ensemble des graphiques du présent document, sauf mention contraire, ont été établi à la date de publication de ce document.
 
Les destinataires de ce document s’engagent à ce que l'utilisation des informations y figurant soit limitée à la seule évaluation de leur intérêt propre en considération des stratégies visées. Toute reproduction partielle ou totale des informations ou du document est soumise à une autorisation préalable expresse de la Société.
 
Rédacteur : AXA Investment Managers Paris – Tour Majunga – 6, place de la Pyramide – 92908 Paris La défense cedex. Société de gestion de portefeuille titulaire de l’agrément AMF N° GP 92-08 en date du 7 avril 1992 S.A au capital de 1 384 380 euros immatriculée au registre du commerce et des sociétés de Nanterre sous le numéro 353 534 50

 

 

 

La croissance du marché de la robotique n’est pas synonyme de performance des actions/sociétés citées.

Ce document est exclusivement conçu à des fins d’information et ne constitue pas de la recherche en investissement ou une analyse financière concernant des opérations sur des instruments financiers tels que définis par la Directive MIF (2014/65/CE), et ne constitue pas de la part de AXA Investment Managers ou de ses sociétés affiliées ni une proposition d’acheter ou de vendre des produits ou services d’investissement, ni une sollicitation ou un conseil en investissement, légal ou fiscal, ni une recommandation pour une stratégie d’investissement ou une recommandation personnalisée d’acheter ou de vendre des titres. Il a été établi sur la base d'informations, projections, estimations, anticipations et hypothèses qui comportent une part de jugement subjectif. Ses analyses et ses conclusions sont l’expression d’une opinion indépendante, formée à partir des informations disponibles à une date donnée. Toutes ces données ont été établies sur la base d’informations rendues publiques par les fournisseurs officiels de statistiques économiques, et de marché. La responsabilité d’AXA IM ne saurait être engagée par une prise de décision sur la base de ce document. L’ensemble des graphiques du présent document, sauf mention contraire, ont été établi à la date de publication de ce document. Du fait de leur simplification, les informations contenues dans ce document sont partielles. Du fait de la nature subjective de ces opinions et analyses, ces données, projections, prévisions, anticipations, hypothèses et/ou opinions ne sont pas nécessairement suivies ou utilisées par les équipes de gestion de portefeuille d’AXA IM ou de ses affiliés, qui peuvent agir en s’appuyant sur leurs propres opinions. Toute reproduction partielle ou totale des informations ou du document est soumise à une autorisation préalable expresse d’AXA IM.

AXA Investment Managers Paris – Tour Majunga – La Défense 9 – 6, place de la Pyramide – 92800 Puteaux. Société de gestion de portefeuille titulaire de l’agrément AMF N° GP 92-08 en date du 7 avril 1992 S.A au capital de 1 384 380 euros immatriculée au registre du commerce et des sociétés de Nanterre sous le numéro 353 534 506.

What you need to know

Climate change is material risk - Global warming poses long-term physical risks as the climate changes, as well as nearer term risks as the energy sector shifts from fossil fuels to low-carbon alternatives. Climate science and the Intergovernmental Panel on Climate Change (IPCC)
have shed light on the global carbon efficiency gains needed to keep the temperature rise by the end of the century to a maximum of 1.5°C compared to the pre-industrial era. The Paris Agreement implies that annual global net CO2 emissions will have to be at zero by 2050 and halvedby 2030. This effort is being distributed differently among industries and countries. 

A major challenge for long-term investors - Investors are being incentivized to integrate climate into their allocation decisions. This is happening on several fronts:

  • Perceptions of investment risks are shifting rapidly to include climate change as a leading concern. In the latest Global Risks Perception Survey, environmental concerns dominate the list of major long-term risks identified among members of the World Economic Forum’s multi- stakeholder community.

  • There is a growing weight of evidence that climate change is financially material. A study by consultants Mercer (1) showed that a scenario keeping global warming to below +2°C is the likely best outcome to investors, compared to +3°C (current Paris Agreement pledges) and +4°C scenarios (business as usual) from a long-term investor perspective. Looking ahead to the half century, a +4°C scenario would leave a developed markets equity portfolio down by -5.6% and diversified portfolios down more than 0.10% each year up to 2100 compared to a +2°C scenario.

  • Regulation and prudential oversight is incorporating global warming concerns in ways that will affect institutional long-term investors. For example, we can highlight regulatory discussion in Europe around the integration of a green or a brown factor into capital requirements.

AXA IM’s approach to Climate Change Strategic Asset Allocation (2)  - Climate Change is not impacting investment assets in an equal manner. In this research, we present an approach based on current carbon-intensity data and a climate-related typology of assets to enable a strategic asset allocation exercise consistent with a +1.5°C trajectory. Our simulations show that incorporating into the SAA the +1.5°C objective of halving carbon emissions by 2030 could be achieved without deteriorating risks-adjusted returns.

Limitations remain – The lack of data and standards to measure climate impacts remains an obstacle to allowing investors to align to a +1.5°C trajectory. To ensure reasonable investment exposure to sectors at stake in the transition, the following considerations are necessary:

  • Metrics used to materialize climate impacts need to be enriched and  more forward looking. In particular, carbon performance measures should cover the 3 scopes of CO2 emissions, and new climate metrics such as the green share and investment temperature should be integrated into the analysis.
  • SAA frameworks and market indices need to be further adapted to better reflect various levels of an asset’s maturity in the transition. Through its alignment investment principles, AXA IM proposes an introductory framework for further research to better align SAA with the +1.5°C trajectory.

1 Mercer, The Sequel 2019
2 AXA IM is involved in two collective research projects on the topic of Sustainable Strategic Asset Allocation with the UNPRI (see « Embedding ESG
issues into strategic asset allocation frameworks: Discussion paper », September 2019) and the French Sustainable Investment Forum (French SIF)
that should come up with next collective publications later this summer.

Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments

as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX.

In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries. Design & Production: Internal Design Agency (IDA) | 18-UK-010603 - 2020 | Photo Credit: Getty Images

Analyses et stratégies d’investissement

Stratégie d’investissement mensuelle deJuillet - Et après l’été ?

Points clés :

  • L'Europe a récemment connu un (rare) moment de surperformance.
  • Pourtant, étant donné l'abondance de défis à venir, l'Europe ferait bien de prévoir quelques "parachutes". Pour l'instant, en dépit de l’accord sur le FRR, les États-Unis en font toujours plus sur le front de la relance.
  • Les actions ont bien performé malgré les inquiétudes concernant le virus, l'impact économique et d'autres incertitudes comme les élections américaines.
  • Un coup de pouce budgétaire préélectoral aux Etats-Unis, une décélération dans le taux d'infection et le succès de la recherche d'un vaccin pourraient donner une nouvelle impulsion positive significative.
  • Les bénéfices seront importants, notamment lorsque les attentes des analystes concernant un rebondissement commenceront à être confirmées par les entreprises elles-mêmes.

L'Europe peut-elle rester "en bonne posture" pendant longtemps ?

Pour reprendre les mots de Christine Lagarde, la zone euro est "en bonne posture" depuis peu. C'est une notion relative, bien sûr. Par rapport aux États-Unis, la pandémie est désormais beaucoup mieux contrôlée et les indicateurs en temps réel continuent, pour la plupart, à se normaliser à un rythme soutenu, ce qui contraste fortement avec les États-Unis où l'on signale désormais une rechute de l'activité. Cela s'est reflété dans les indices boursiers ces derniers temps, l'Europe connaissant un (rare) moment de surperformance. La situation reste cependant précaire. A court terme, nous nous concentrons sur trois risques.

Premièrement, bien que la réaccélération de la circulation du virus soit loin d'atteindre le rythme observé aux États-Unis, il existe quelques risques comme en témoigne la situation en Espagne, actuellement le point chaud en Europe. La tolérance au risque de ce côté de l'Atlantique est faible et les mesures de confinement – qui entraînent une perturbation de l'offre – ont tendance à être réimposées plus rapidement qu'aux États-Unis pour un rythme donné de propagation (les récentes nouvelles de Barcelone en sont un exemple). Les indicateurs en temps réel ont commencé à refléter une légère rechute de l'activité en Espagne, pouvant également suggérer que les citoyens européens pourraient réagir avec plus de prudence que les américains, ce qui est aussi important que la réaction des autorités publiques.

Deuxièmement, jusqu'à présent, la transmission de la politique monétaire a été rapide – ce qui se reflète dans les flux records de prêts accordés au secteur des entreprises depuis mars. Mais l'enquête de la Banque Centrale Européenne (BCE) sur les prêts bancaires suggère maintenant que les banques se préparent à resserrer leurs conditions de crédit, anticipant la fermeture de l'accès aux garanties d'État. Christine Lagarde a appelé les gouvernements à redéfinir leurs programmes pour éviter une telle déconvenue.

Troisièmement, le marché du travail est actuellement soutenu artificiellement par des mesures extraordinaires telles que des allocations de chômage à temps partiel très généreuses. Les enquêtes menées auprès des entreprises suggèrent qu'il y a de nombreux "licenciements sous-jacents", prêts à se concrétiser lorsque ces mesures gouvernementales seront réduites. Cela pourrait nuire aux dépenses de consommation même si pour le moment le rebond est plus fort que prévu.

Face à ces risques, l'économie européenne a besoin d'un "parachute". C'est là que le contraste avec les États-Unis fonctionne en sens inverse. Le secrétaire au Trésor, M. Mnuchin, discute ouvertement de la possibilité d'une "remise générale" pour les petits prêts accordés dans le cadre du programme de protection des salaires (Paycheck Protection Programme), tandis que la Chambre a adopté un plan de relance supplémentaire représentant 8% du PIB en 2020 et 7% en 2021. En difficulté dans sa campagne – les sondages sont désormais largement favorables à Joe Biden – le président Donald Trump semble de plus en plus ouvert à certains aspects du plan économique proposé par la Chambre. Enfin, la Réserve Fédérale (Fed) a explicitement engagé une conversation sur le "contrôle de la courbe des taux" au cas où le renforcement de l’orientation prospective ne parvenait pas à contenir les attentes du marché.

En Europe, les plans nationaux de relance budgétaire semblent encore modestes. Heureusement, même si la négociation du Fond de Relance et de Résilience (FRR) de l'UE a été plus douloureuse que prévu, un accord a été trouvé, envoyant un signal politique puissant, notamment parce que le tabou de la mutualisation des dettes est maintenant brise. Pour autant, le dispositif ne devrait donner lieu qu'à un stimulus supplémentaire de 3 à 4% du PIB cumulé sur sept ans. Cela ne change pas la donne sur le plan macroéconomique, et les budgets nationaux devront faire plus.

Depuis le début de la crise, les marchés ont oscillé entre se concentrer sur le risque de pandémie lui-même ou sur le soutien politique. Sur le premier plan, l'Europe continue de faire mieux que les États-Unis. Mais sur le second, les États-Unis restent en tête. Cela pourrait empêcher les marchés européens de continuer à surperformer.

Le triomphe de la reprise

Dans l'ensemble, cependant, les investisseurs en actions continuent de bénéficier de rendements élevés. Si les évolutions à court terme peuvent répondre aux subtilités du processus d'élaboration des politiques et du flux d'informations, la force dominante derrière la hausse des marchés est la conviction que le monde se redressera, tant sur le plan économique que sur celui de la pandémie. Il s'agit d'une psychologie importante qui contribue à expliquer l'apparente déconnexion entre la dynamique du marché et les valorisations d'une part, et les insécurités créées par la pandémie d'autre part.

L'espoir de rendements supérieurs pour les investisseurs en actions alors que le monde s'adapte à la réalité post-pandémique ne doit cependant pas être teinté de complaisance. L'économie mondiale a été et continue d'être fortement touchée. Il y a déjà moins d'emplois et ce n’est que le début. Les élections américaines vont créer une incertitude politique à moyen terme. Le virus pourrait refaire surface à l'approche de l'hiver. Nous n'avons pas encore pleinement assimilé dans quelle mesure la mondialisation sera modifiée et quelles en seront les conséquences.

Les mois à venir pourraient toutefois soutenir les marchés. L'accord européen, l'impulsion budgétaire préélectorale aux États-Unis, les avancées dans la recherche d'un vaccin et le pic potentiel du taux d'infection seraient des facteurs positifs. Il convient de rappeler que les rendements de la plupart des indices boursiers sont restés négatifs depuis le début de l'année. Le choc du premier trimestre a propulsé les rendements obligataires au-dessus de ceux de la plupart des stratégies d'actions. Aujourd'hui encore, le rendement total d'un indice du Trésor américain à partir de la fin 2019 est bien supérieur aux rendements de la plupart des stratégies d'actions. À moins d'un grave retournement de la croissance ou de la crise sanitaire, il est peu probable que cette surperformance des titres obligataires se poursuive. Les investisseurs auront du mal à obtenir des rendements supérieurs à un chiffre dans la plupart des secteurs obligataires, tandis que la détention d'actions offre une exposition à la hausse en cas de reprise.

Nous venons d'entrer dans la période des résultats du deuxième trimestre aux États-Unis et les premiers résultats sont positifs. Le consensus prévoit un retour à une croissance positive en glissement annuel du bénéfice par action (BPA) d'une année sur l'autre au début de 2021, sur la base de ce que nous avons déjà constaté lors du rebondissement de l'activité économique. Toutefois, ces prévisions sont encore fragiles car les entreprises ont peu de visibilité sur la façon dont la reprise se déroulera. Les attentes des analystes doivent être confirmées par les entreprises elles-mêmes. Lorsque nous commencerons à obtenir cette confirmation, les doutes sur la capacité du marché boursier à rester élevé commenceront à s'estomper.

Le fait que les marchés soient en hausse par rapport à ce que nous savons déjà suggère que quelque chose de bien pire se produise pour nous faire repartir dans une tendance baissière. Cela pourrait bien sûr être quelque chose d'aussi simple qu'une deuxième vague conséquente de Covid et un nouveau confinement pour une grande partie de l'économie mondiale. Il est très peu probable que l'activité économique revienne aux niveaux de début avril, mais la crainte d'un tel scénario pourrait suffire à faire baisser les marchés de manière significative à un moment donné. Pour l'instant, heureusement, les signaux ne vont pas dans ce sens.

Télécharger la présentation détaillée de notre Startégie d'Investissement de Juillet (en Anglais)

AVERTISSEMENT

Ce document est exclusivement conçu à des fins d’information et ne constitue ni une recherche en investissement ni une analyse financière concernant les transactions sur instruments financiers conformément à la Directive MIF 2 (2014/65/UE) ni ne constitue, de la part d’AXA Investment Managers ou de ses affiliés une offre d’acheter ou vendre des investissements, produits ou services et ne doit pas être considérée comme une sollicitation, un conseil en investissement ou un conseil juridique ou fiscal, une recommandation de stratégie d’investissement ou une recommandation personnalisée d’acheter ou de vendre des titres financiers. Ce document a été établi sur la base d'informations, projections, estimations, anticipations et hypothèses qui comportent une part de jugement subjectif. Ses analyses et ses conclusions sont l’expression d’une opinion indépendante, formée à partir des informations disponibles à une date donnée.

Toutes les données de ce document ont été établies sur la base d’informations rendues publiques par les fournisseurs officiels de statistiques économiques et de marché. AXA Investment Managers décline toute responsabilité quant à la prise d’une décision sur la base ou sur la foi de ce document. L’ensemble des graphiques du présent document, sauf mention contraire, a été établi à la date de publication de ce document. Du fait de sa simplification, ce document peut être partiel et les informations qu’il présente peuvent être subjectives.

Par ailleurs, de par la nature subjective des opinions et analyses présentées, ces données, projections, scénarii, perspectives, hypothèses et/ou opinions ne seront pas nécessairement utilisés ou suivis par les équipes de gestion de portefeuille d’AXA Investment Managers ou ses affiliés qui pourront agir selon leurs propres opinions. Toute reproduction et diffusion, même partielles de ce document sont strictement interdites, sauf autorisation préalable expresse d’AXA Investment Managers.

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© AXA Investment Managers 2020

Investissement responsable

Rapport AXA IM : innovations sur la stratégie climat et investissement d’impact

Chez AXA IM, nous sommes profondément engagés dans la lutte contre le réchauffement climatique. En tant qu’investisseur de premier plan, nous avons un rôle à jouer. Il est de notre devoir d’accompagner nos clients à mieux appréhender cette problématique et son potentiel impact sur leurs portefeuilles, puis de les accompagner pour adapter leurs décisions d'investissement. En tant qu'actionnaire, il est également de notre responsabilité de nous engager auprès des entreprises pour les inciter à mieux prendre soin de l'environnement et contribuer à l'amélioration de la santé publique ainsi que des conditions de travail.

Le rapport TCFD reflète nos innovations en matière de stratégie climatique, d'investissement et de reporting, ainsi que notre volonté de générer un impact positif et mesurable sur les marchés cotés et non cotés.

Market thinking

COVID-19: Why 2020 is not 2008 – the fund manager view

As we consider how the world will recover from COVID-19, it is vital that we remain aware of how this crisis is very different in nature to the market shock of 2008/2009 and understand how this will shape our path back to growth.

Compared to the technology bubble at the turn of the century and subprime housing crash of 2008, there was no indication in early 2020 that the market had suddenly reassessed its understanding of prices.

We were in the middle of an 11-year bull market, underpinned by low interest rates and vast amounts of liquidity, thanks to globally-coordinated quantitative easing programmes.

Unlike 2008, this is an exogenous crisis – it is not about a fundamental mispricing of assets and a sharp split between market participants. Endogenous risks such those endured previously are hugely difficult to unravel as they can leave the fundamental structure of markets deeply fragile.

Whereas 2008/2009 left the banking sector dazed and confused, 2020 has seen it resilient and responsive. Bank balance sheets were more prepared for shocks, as a result of higher capital requirements and new policies and regulations to support financial institutions and their customers.

As the coronavirus pandemic spread, the financial sector also benefited from the significant support of governments and central bank policymakers. But while these coordinated responses have been extraordinary, helping to shore up financial markets and retain liquidity, the success of the rescue packages is reliant on how the pandemic continues to evolve

Below, four AXA IM experts outline their experience of the 2020 COVID-19 crisis and explain how it compared to 2008/2009…

CIO Core Investments, Chris Iggo

Whenever there is a crisis, things change. The frailties of the economic system were cruelly exposed in 2008 by the financial crisis and have been once again by the coronavirus in 2020. The challenge for asset managers following 2008 was to adapt to a rapidly changing regulatory environment. The focus was very much on improving governance across the whole financial services sector.

That led to increased costs and more compliance. In time, however, it probably accelerated the shift towards more responsible investing. Today’s crisis started outside of the economic system. All businesses are challenged and there has clearly been a massive human cost, the likes of which were not seen in 2008. Yet in a sense there is more opportunity today than there appeared to be in the dark days following the collapse of Lehman brothers and the recession that followed. Our focus, as investors, is even more on responsible investing.

The pandemic has made us all reflect on existential threats but also on the value of human wellbeing and diversity. Both 2008 and today required massive government interventions to prevent very bad situations becoming even worse - and the legacy of that will continue to shape economic policy decisions in the future.

I am hopeful, however, that the opportunities presented by the need to focus on health, on technology and changing business and consumption models can allow the asset management industry to continue to flourish. I have never thought during these past weeks that our business was doomed but that was the feeling many of us had in the depth of the financial crisis.

Head of Active Fixed Income (Europe), Marion Le Morhedec

Perhaps the biggest difference between 2020 and 2008 is that 12 years ago the financial services sector was a major part of the problem - but during the COVID-19 crisis, it has been very much part of the solution.

Another contrasting factor has been the length of the liquidity crisis; it has been very brief in 2020 - closely linked to the lockdown. I’ve been through episodes of low liquidity and it is always stressful given the potential impact it can have on performance - and therefore clients. But central banks acted swiftly, ensuring decisions made at the macro level were being implemented at the micro end. The introduction and day-to-day consequences of quantitative easing (QE) were much quicker in 2020 versus 2008/2009.

But regardless of any market crisis, I think the fundamental reasons to invest – to actively take positions - remain the same. Our process is based on Macro, Valuation, Sentiment and Technicals (MVST) analysis and this year the latter has been driving and dominating our investment decisions, which is exactly what happened in 2008.

Like all crises, any period of massive stress creates investment opportunities – and thankfully we’ve been able to capture many, especially in the credit universe. We’ve been extremely active in this period. However, looking ahead, we will need to be highly selective as we believe there is less direction in markets, so I expect active investing will be much more about micro than macro allocation across fixed income.

Our investment process has been continuously improving over time and has shown that we can provide performance in different type of market environments. However, the crisis will have a lot of implications - the way we all work and live is going to be very different. But I believe environmental, social and governance (ESG) investing will be a beneficiary of the so-called ‘new normal’.

Green bond issuance and social and sustainable bonds issuance is likely to pick up - there is strong momentum here already. In addition, we anticipate massive investments from governments and agencies around climate change – and to support jobs and diversity. This new trend gives an additional sense of purpose to fixed income investment that we welcome as responsible investors.

Framlington Equities Senior Portfolio Manager, David Shaw

Given the speed at which central banks and governments reacted to the COVID-19 pandemic, it was abundantly clear that lessons had been learned from the previous crisis. The hit to markets and economies cannot be underestimated, but in my view a banking crisis is the worst kind - chiefly because of the knock-on effects on the broader economy.

Understandably markets are currently beleaguered by uncertainty. But I don’t think there was ever that much concern that the banking sector was going to collapse. Like the wider market, bank shares have taken a hit, but their performance has also reflected the backdrop of low interest rates – and the expectation that they will remain in the doldrums for some time yet. Nonetheless we have not witnessed the level of panic selling which took place in 2008, as banks’ reserves are far more robust these days.

During the time of the global financial crisis, bank shares fell 79% between the end of 2007 to the trough in March 2009, according to the KBW Bank Index. This time around they endured a 42% fall during the first three months of the year – but have since regained some ground, to the tune of 15% by circa mid-July. In 2008 we didn’t know how long it would take the market to recover, and ultimately it took a long time. This time, given the liquidity and central bank support, it is reasonable to think the rebound will be quicker.

US consumers are in a much better position compared to 2008/2009 when they had virtually no savings as for most people, the majority of their wealth was tied up in the then ill-fated property market. Notably in the US during May, a strong jump in permits for future construction suggested the housing market was starting to emerge from the coronavirus crisis. The US savings rate – as a percentage of disposal income - amounted to 7.6% in 2019 but by May 2020, it had jumped to 23.2%.*

From an investment point of view, certainly, last time I owned some companies which I thought were in a better financial position than a lot of their rivals. This time my focus on strong balance sheets has been front and centre. A strong balance sheet is worth more than you might think in terms of traditional valuation metrics even with the financial support and stimulus that is coming. Looking ahead, I am cautiously optimistic. Once US consumers are in a good place, they will spend - if they are confident that they will have a job to come back to.

One issue to note however, is that it really felt post-2008 that the businesses that survived and prospered had a strong culture and strong sense of mission. Such firms often cut salaries and not jobs. This factor, surrounding social governance, certainly became a standard question for most investor/company meetings following the crash. I expect this will become even more of focus going forward.

Rosenberg Equities Global CIO, Gideon Smith

Parallels are often made between the (apocryphal) Chinese curse about ‘living in interesting times’, and the experience investors have of living through ‘volatile’ times – market volatility often being the defining characteristic of periods of crisis.

It’s certainly the case that the peak volatility equity investors experienced during the financial crisis of 2008/2009 and the COVID-19 crisis of today were similar. As equity investors, our job is as much about managing risk as it is about seeking returns, and our experience 12 years ago focused us on the need to be decisive in our response to volatility.

In this case, that need for speed was even more imperative as the market moves were far more rapid – during the previous crisis it took 18 months for the markets to fall from peak to trough; this time it took just 22 days. Furthermore, the government response was far more emphatic on this occasion – as one institutional investor noted: “They showed up early and they showed up big.”

As we considered our response we focused on the distinctive characteristics of this crisis, and the structural features we see in the market – not least the higher levels of profitability some companies appear to be able to sustain and the dispersion in profitability. This reflects a less competitive world, but it also means that the impact of the crisis has not fallen evenly across the market.

During times of crisis it is normal to see a ‘flight to quality’ – but those safe havens have evolved and shifted. Today it is the mega-cap stocks of the technology sector, with their mountains of cash and their ‘profitability moats’, that have provided that safe port. As we look to 2021, this is leading us to evolve how we think about profitability, quality, and defensiveness – and the types of stocks we consequently invest in.

There are also some salutary lessons from 2008/2009 that we must keep in mind – as the world emerged from that crisis it sparked a decade of inequality, with individuals and small businesses being disproportionally hit. Those themes have not gone away. This may further underpin the competitive advantage of larger companies. But equally, it may also create opportunities for those corporations that are able to democratise access to healthcare and technology.

Returning to Chinese apocrypha, people often cite the Chinese word for “crisis” as being composed of two Chinese characters – those signifying ‘danger’ and ‘opportunity’ respectively. Apocryphal or not, as investors we must keep both ideas in mind as we go about our business in the coming year.

*Source: Statista.com

(https://www.statista.com/statistics/246268/personal-savings-rate-in-the-united-states-by-month/) 

Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX.

In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

 

Vues d’Iggo

Un été en Europe

Summary  - The strongly developing consensus appears to be pro-Europe relative to the US. A stronger Euro and a negative view on US equities is part of that. The political and health situation in the US is beginning to undermine investor confidence. The European deal has boosted the outlook on this side of the Atlantic. However, long periods of Euro and European equity outperformance versus the US have been rare. The last time was between 2001-2008. The key is whether the post-Recovery Deal period generates the same growth and confidence as those early years of the single currency. For now Europe is cheaper and the short-term news flow is better. Happy Summer.  

Euro-up

The Euro has benefitted the most from the agreement made last weekend to establish the European recovery fund. Against the dollar, the Euro has risen by 9.2% from the low reached on March 23rd (the day global stock markets also bottomed) and it is up 10% against sterling. The rally has ben long-hoped for by dollar bears who have activated a number of arguments for why the US currency should weaken and have now got a more positive European story to add to the arsenal. The agreement on the recovery fund allows fiscal transfers and provides for some mutualisation of Euro Area debt. Potentially this means that joint fiscal policy and the establishment of a unified debt market are realistic future developments. Symbolically this is huge in a similar way to Mario Draghi’s pledge in 2012 to do whatever it takes to save the euro. In theory, and maybe in practice, European policy makers now have an additional large and effective policy tool to deal with future periods of economic crisis.

Good for credit at the margin

In the short-term the macroeconomic implications of the deal depend on how quickly the funds are disbursed and the types of projects the funds are used to finance. On top of the policies of the European Central Bank (ECB) and national fiscal initiatives, the outlook is certainly further improved by the deal. Marginally this is supportive for the currency but equally we should get another big fiscal stimulus from the US soon, which by the same logic should be dollar positive. More importantly, the deal is further insurance against systemic risk in the Euro Area. So along with benefits for the Euro currency, credit asset classes also win out of the deal – both at the corporate and sovereign levels. Prior to the crisis, the asset swap spread on the ICE/BofA European Corporate Bond Index was around 60 basis points (bps). Today it is around 100 bps. Further tightening is likely as a result of the boost to confidence the deal brings, and this should occur across the ratings spectrum. On the sovereign side, spreads should also narrow further. Italy will be the biggest recipient of funds from the Recovery and Resilience Facility. Its deficit and issuance levels will not increase as much as what is spent in Italy. This improves fiscal dynamics somewhat, as will the ensuing lower borrowing costs for Rome. The spread between 10-year Italian government and German government bonds was last as low as 100 bps at the end of 2015. There appears no reason to think it won’t get there again in the months ahead. Personally, I don’t think it is a great trade though. Italy’s fiscal and political risks are still there, but momentum could push yields lower.

Further gains ahead?

So reduced systemic and credit risk, improved debt dynamics for the most fiscally challenged and a marginal improvements in the growth outlook. These are the positives for the Euro. The political symbolism and the potential to jointly react with fiscal policy is perhaps the most important. The Euro rallied strongly following Draghi’s 2012 comments, moving from US$1.20 to US$1.40. The current rally started from a lower base and probably has further to go – certainly into the US$1.20-1.25 range. It has momentum and arguments for a strong dollar don’t hold much water at the moment. There is political and policy uncertainty, with the election looming and the real risk of a second dip in national economic activity in response to the pandemic.

Not guaranteed

The view needs some perspective though. While the headlines have been about the deal being a “game-changer”, it should also be noted that the agreement was not easily reached. A number of countries appear to have been reluctant participants. It sits within the EU’s 7-year budget process and most informed observers suggest that topping up the €750bn facility is extremely unlikely before the end of this period, unless of course there is another crisis. Secondly, Europe does still have a growth issue. At the end of 2019, Euro Area GDP was only 9.5% higher than it had stood on the eve of the Global Financial Crisis at end-2017. In comparison, the US GDP level was 21% higher. Current consensus forecasts have 2022 real GDP growth in the Euro Area at 2.2% and 2.9% in the US. With Europe’s export sectors already badly impacted by trade sanctions and the disruptions caused by coronavirus, the last thing they need is a very strong currency. Maybe crossing the Rubicon of fiscal transfers, having a stronger institutional economic policy framework and banishing Euro break-up fears will allow trend growth to improve. Getting a Brexit-deal might also be a positive. This is what investors appear to be betting on.

Capital flows

Currencies are ultimately driven by capital flows and for any rally to persist these have to be more than short-term and speculative. Are global investors going to increase their allocations to European equities? While past performance is no guarantee of future returns, the fact that the S&P500 has had annualised total returns of almost 6% compared to 2.1% for the EuroStoxx index over the last twenty years is a huge barrier to get over if we are going to see American investors swap some of their FAANGS for European industrials and banks. There may be a reason for owning Europe over the US for defensive reasons – European indices have a lower beta to the US market – but that is not exactly in the spirit of a European renaissance.

US growth

Being positive on the Euro is a consensus view at the moment. Being negative on US equities is starting to become a consensus view as well. The US is more of a growth market. A lot of people express incredulity at the performance of the NASDAQ index but its constituent companies have delivered a compound earnings growth rate of 10% per year since 2010, compared to just 0.7% for the EuroStoxx index, 0.9% for the German DAX index and -0.9% for the CAC-40 (using Bloomberg 12-month trailing EPS data). Of course, the NASDAQ is dominated by the big tech companies – the top 5 account for 40% of the market capitalisation of that index. The growth of these companies has exaggerated the overall growth profile of equity earnings for the US, but even broader and less tech heavy indices have a superior record relative to Europe. According to IBES data on trailing earnings-per-share, the S&P500’s growth rate has been more than double that of Europe since the launch of the Euro in 1999.

US risks

A persistent outperformance of European equities requires a number of factors to come together. First the global recovery needs to be reassured by progress on the virus and an upturn in global trade and investment. Second, this needs to be reflected in a more pronounced “value” outperformance, confirmed by some steepening of risk-free curves and a strong performance of lower rated credit. On the US side concerns about the policy environment in the wake of a Biden victory in November’s presidential election need to further materialise. Given the dominance of big tech, this could come from proposals directed at increasing the tax take from those companies. The Alternative Minimum Corporate tax and increasing the tax rate on revenues of US-foreign subsidiaries could reduce after tax earnings for these firms. Efforts to address the monopoly nature of these firms might also be seen. The combined health and economic impact of the virus could also turn out to be worse and more prolonged in the US relative to Europe.

NEU bonds

One of the features of the European deal will be a big increase in bond issuance by the European Union. If all the €750bn is raised via the bond market, investors will be able to tap into a new, liquid and high quality asset. The face value of the European government bond market is around €6 trillion so the new EU bonds will represent around 12.5% - making them bigger than the outstanding Dutch and Belgian markets combined and roughly 85% of the size of the Spanish government bond market (according to the size of the ICE BofA government bond market indices). The emergence of a new liquid asset will be welcome by banks, pension funds and insurance companies who have all been insatiable demanders of duration. What it will do to the pricing of other curves remains to be seen. What it won’t offer is a great return, as yields are likely to be very, very low. Still, improving the capital market infrastructure will help strengthen the Union and its economy at the margin. It will, however, be sometime before the EU bond challenges the dominance of the $11 trillion US Treasury market.

Bar-bell

It’s reasonable to conclude that the deal is good for Europe and will help European assets. Being long the Euro versus the dollar, yen and sterling might be the best bet for a decent short-term return but I am not convinced we are in a multi-period rally unless growth materially rises. There are reasons to be concerned about the US but the reality is that generally banks are stronger and tech is where the growth is and will continue to be. Europe could outperform for a while if we get a cyclical value-led recovery and the crystalisation of political concerns in the US. Indeed, these might be quite malign for equity investors going into Q4 given the ongoing fragility of the economic recovery and the need for investor confidence to continue to be shored up by (promises of) further policy support. With monetary policy on hold everywhere equity and multi-asset investors should look at being exposed to duration assets to hedge. The NASDAQ is volatile. So far in 2020 it has also had a -0.4 correlation of daily price returns to the over 15-year US Treasury index. If the NASDAQ represents an extreme of “growth”, the long-end of the Treasury market represents the risk-off antidote. Putting them together, so far this year, would have lowered risk and increased returns relative to either an equity only or bond only strategy. The key is hedging one asset with a high price volatility with something else, negatively correlated, with an similarly higher price volatility.

Down to the wire

With one Premier League match left, there is much to play for. Two out of Manchester United, Chelsea and Leicester City will claim a Champions’ League spot for the 2020-2021 season. United only have to draw with Leicester. None of the three teams have been particularly convincing of late but Leicester perhaps have been the least. IT would be a great achievement for United to claim 3rd or 4th place given the start to the season they had. If they do, I will head to Cornwall for my 2020 holiday a happy fan. It’s usually Spain, but not a European summer this year. Cornish pasties and mackerel instead of paella and sardinas!

Stay safe and have a good weekend!

Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.

Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX.

In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

Analyses et stratégies d’investissement

US presidential election preview: You’re fired?

Key points

  • Presidential and Congressional Elections are less than 100 days away. However, if the elections were held tomorrow, polls suggest Democrat nominee Joe Biden would win and the Democrats could take both the House and the Senate.
  • President Trump may recover from low ratings over the remaining months if the virus abates and the economy recovers. This would still be an uphill struggle to save the Presidency but could see Republicans retain a Senate majority.
  • Biden proposes the most progressive programme in nearly half a century. The degree of control over Congress will determine the extent to which his proposals can pass.
  • Biden’s spending plans should deliver more of a short-term boost to the economy, although we expect meaningful fiscal support whatever the makeup of the next government. Biden’s program looks likely to be more positive for US long-term growth prospects as well.
  • Market reaction to a Biden election looks likely to be cautious and could add to short-term economic headwinds

Less than 100 days, but plenty could happen

The 22nd Amendment was passed in 1947 limiting the office of the President to two terms. This followed the death of Franklin D. Roosevelt during his fourth term. Since then the US has had 12 Presidents. Eight of those have been elected to continue in office (Lyndon Baines Johnson was not elected for his first term, becoming President after the Kennedy assassination). Three Presidents did not secure a second term, including Gerald Ford, Jimmy Carter and George H. Bush. Donald Trump will aim to avoid joining this small group of former US Presidents as he seeks a second term in office.

The following note considers the likelihood of this as President Trump competes with Democrat nominee and former Vice President Joe Biden. We describe the broader race for Congress, considering the separate dynamics for the battle for control of the House of Representatives and the Senate. We look at the policy alternatives that different electoral scenarios could deliver. And we describe the likely economic and market implications of different outcomes.

The Next President

With less than 100 days before election day, Joe Biden has a significant lead in both national polls and crucial battleground states. Over the last month, Biden has maintained an average lead of 9 points over Trump. Two polls in July estimated this lead at 15 points, one of which was the ABC News/Washington Post poll – one of the most accurate pollsters near election day in 2016.

It is not just the size of Biden’s lead that is impressive: Biden has recently topped the 50% mark in several polls, reducing the number of ‘undecideds’ that Trump could win. According to polling website 538, Biden is only the third candidate to break 50 points at this stage in the race. The other two were both incumbents: Richard Nixon in 1972 and Ronald Reagan in 1984, who both went on to win by a large popular vote margin of 23 and 18 points respectively. Although a similar result in November would be highly unlikely, current polls suggest the President has a lot of ground to recover.

This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document. Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.

This document has been edited by AXA INVESTMENT MANAGERS SA, a company incorporated under the laws of France, having its registered office located at Tour Majunga, 6 place de la Pyramide, 92800 Puteaux, registered with the Nanterre Trade and Companies Register under number 393 051 826. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

In the UK, this document is intended exclusively for professional investors, as defined in Annex II to the Markets in Financial Instruments Directive 2014/65/EU (“MiFID”). Circulation must be restricted accordingly. 

© AXA Investment Managers 2020. All rights reserved

COVID-19: Stewardship and the pandemic

AXA Investment Managers (AXA IM) today publishes its H1 2020 Stewardship Report, outlining its engagement programme for the first half of the year and how it exercised its voting rights in H1 2020.

The COVID-19 crisis has sharpened the importance of active ownership, particularly around certain crucial issues. We doubled down on some of our engagement activities around public health, human capital and shareholder rights. So too, our enhanced voting policy on core themes revealed our industry leadership on resolutions around gender diversity, climate change and board accountability.

As an active long-term fund manager, we had the agility and experience to respond quickly and meaningfully in this crisis, helped in part by the quality of our existing relationships with investee companies.

Despite all the challenges of this lockdown period, we engaged more companies in a six-month period than ever before - 181 issuers - on behalf of our clients and wider stakeholders. We also voted at 4,300 shareholder meetings in H1 2020.

AXA IM’s record of expressing our opinion and recommendations through engagement and voting is revealed in this report. The case studies and the statistics in the report go some way to revealing the breadth and depth of our ever-evolving active ownership programme as we strive to meet our stewardship-related duties, and drive positive impact for society and the environment.

To read the full H1 2020 Stewardship Report from AXA IM, please click here.

In response to the publication of the report, Yo Takatsuki, Head of ESG Research and Active Ownership at AXA IM, said:

“The first six months of 2020 can be divided into two very distinct halves. Our engagement programme came in two highly-contrasting segments – business as usual before the COVID-19 lockdown, and then an altogether quite different period when we were all confined to our homes from mid-March onwards.

“For most of the first quarter (Q1), our engagement was focused on the key thematic areas that we consider most urgent and material for investors: climate change, biodiversity, human capital as well as gender diversity, public health, data privacy and corporate governance. Climate change continued to be a major area of activity throughout the first half.

“The intensity of engagement efforts did not slow even after the lockdown started. We continued to participate in the Climate Action 100+ investor group, where we lead engagement with numerous companies in carbon-intensive sectors - and have started an initiative with state-owned oil and gas companies. This period also saw significant climate-related commitments being announced by European energy companies. These were major milestones, a decade in the making.

“We also started our work as co-chairs of the newly established Climate Transition Finance Working Group. This was set up under the auspices of the Green and Social Bond Principles to press forward the concept of transition financing – where companies in carbon-intensive sectors raise funds in capital markets for their decarbonisation efforts. The group has attracted more than 80 institutions ranging from corporates, investors, investment banks and other stakeholders. A Working Group event hosted in February in London focusing on concepts such as science-based targets, and alignment with the +1.5 degrees celsius pathway, envisaged under the Paris Agreement.

“Our work around biodiversity and slowing the extinction of species gathered pace. Investors need to be able to assess biodiversity risks and opportunities but measurement remains difficult due to limited relevant and uniform data. In this respect, we collaborated with three French asset managers to develop a methodology for biodiversity impact measurement.

“Following the lockdown, the dynamics of engagement changed completely as we became reliant on electronic communication. What is noteworthy is just how quickly both our colleagues and the representatives of investee companies adjusted to this “new normal”. It meant that disruption was kept to a minimum, and by April, engagement dialogue had largely resumed. This is an important time of year as companies solicit the views of investors ahead of annual shareholder meetings (see voting section for more).

“Our engagement in Q2 took on a COVID-19 tone. One early observation was that investee companies acknowledged that the crisis brought public scrutiny on their ESG-related practices, whether it was public health, human capital management or shareholder rights-related issues. Our discussions with companies often revealed the strain this placed on boards of directors and senior management as they navigated an unprecedented crisis. The engagement case studies on pages six and seven reveal more about our COVID-19 related engagements.

“On behalf of our clients and wider stakeholders, and despite all the challenges of this period, we engaged more companies in a six-month period than ever before – 181 issuers in 28 countries. The case studies and the statistics that follow go some way to revealing the breadth and depth of our ever-evolving active ownership programme as we strive to meet our stewardship-related duties, and drive positive impact for society and the environment.”

Contacts

Ellis Ford

+44 20 7003 1225

Ellis.Ford@axa-im.com

Hélène Caillet

+33 1 44 45 88 06

Helene.Caillet@axa-im.com

Jamie Wynn-Williams

+44 20 7003 2680

Jamie.Wynn-Williams@axa-im.com

About AXA Investment Managers
AXA Investment Managers (AXA IM) is an active, long-term, global, multi-asset investor. We work with clients today to provide the solutions they need to help build a better tomorrow for their investments, while creating a positive change for the world in which we all live. With approximately €804 billion in assets under management as at end of March 2020, AXA IM employs over 2,360 employees around the world and operates out of 28 offices across 20 countries. AXA IM is part of the AXA Group, a world leader in financial protection and wealth management.

Visit our website: www.axa-im.com

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Visit our media centre: www.axa-im.com/en/media-centre

All data and statistics sourced from AXA IM as at 31 December 2019, unless otherwise stated.

Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities. Past performance is not a guide to current or future performance.

Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision. All investments involve risk. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of the investment.

Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

Deux minutes

Deux minutes pour s’informer sur les marchés financiers

Que faut-il retenir de la semaine passée ?

Après des négociations tendues qui ont duré plusieurs jours, les dirigeants de l'Union européenne ont adopté un budget de 1 100 milliards d'euros et un plan de relance de 750 milliards d'euros pour la région. Destiné à stimuler les économies des États membres dans leur lutte contre l'impact du COVID-19, le fonds de relance a été qualifié par le président français Emmanuel Macron de « moment historique pour l'Europe ». Le programme comprend des subventions d'un montant total de 390 milliards d'euros (moins que les 500 milliards d'euros initialement envisagés) et des prêts, qui seront financés par des emprunts contractés par la Commission européenne sur les marchés financiers.

État du monde

Les nouvelles concernant les progrès réalisés au Royaume-Uni dans le développement d'un vaccin potentiel contre le coronavirus ont suscité un regain d'optimisme sur les marchés la semaine dernière. Toutefois, le président américain Donald Trump a signalé que la pandémie pourrait s'aggraver aux États-Unis avant que la situation ne s'améliore. Le virus a continué à se propager aux États-Unis, pays le plus touché au monde en termes de nombre total de cas et de décès. Parallèlement, les tensions politiques entre les États-Unis et la Chine se sont intensifiées, pesant sur le sentiment à l'égard des actifs à risque et dopant le prix de l'or. Les marchés mondiaux ont clôturé la semaine (jeudi) en légère hausse en dollars 1 .

[1] MSCI World NR exprimé en USD. Source : Factset, données au 23/07/2020

Le chiffre de la semaine

9,2 Mrd USD

La Chine est le deuxième plus grand marché mondial du cinéma, les recettes des salles de cinéma du pays ayant atteint 9,2 milliards de dollars l'an passé. La semaine dernière, les cinémas chinois ont commencé à rouvrir après un confinement amorcé en janvier, mais la capacité des salles reste limitée et d'autres restrictions s'appliquent.

Eclairage

Technique employée par les économistes, entre autres, pour identifier des schémas dans les discours et en tirer des conclusions. Par exemple, en examinant les mots et les expressions fréquemment employés dans les documents publiés par les banques centrales, les articles de presse ou les déclarations des entreprises, il est possible d'établir un parallèle entre le sentiment et la croissance du PIB.

Prochaines échéances

Traitement naturel du language

Lundi, la Banque du Japon publiera sa synthèse dans le sillage de sa décision concernant les taux d'intérêt. De son côté, la Réserve fédérale américaine se réunira mercredi pour décider de l'évolution des taux d'intérêt. Les taux de croissance préliminaires du PIB des États-Unis et de l'Allemagne au deuxième trimestre seront annoncés jeudi, date à laquelle seront également communiqués les chiffres du chômage dans la zone euro. Le taux de croissance préliminaire du PIB de la zone euro au deuxième trimestre sera annoncé vendredi, de même que les chiffres de l'inflation dans la zone euro et aux États-Unis.

L’investissement sur les marchés implique un risque de perte en capital.
 
Ce document est exclusivement conçu à des fins d’information. Il ne constitue ni un élément contractuel, ni un conseil en investissement. Il a été établi sur la base d'informations, projections, estimations, anticipations et hypothèses qui comportent une part de jugement subjectif. Ses analyses et ses conclusions sont l’expression d’une opinion indépendante, formée à partir des informations disponibles à une date donnée.
 
Ainsi, compte tenu du caractère subjectif et indicatif de ces analyses, nous attirons votre attention sur le fait que l'évolution effective des variables économiques et des valorisations des marchés financiers pourrait s'écarter significativement des indications (projections, estimations, anticipations et hypothèses) qui vous sont communiquées dans ce document. En outre, du fait de leur simplification, les informations contenues dans ce document peuvent n’être que partielles. Elles sont susceptibles d'être modifiées sans préavis et AXA Investment Managers n’est pas tenu de les mettre à jour systématiquement.
 
Toutes ces données ont été établies sur la base d’informations rendues publiques par les fournisseurs officiels de statistiques économiques, et de marché. L’ensemble des graphiques du présent document, sauf mention contraire, ont été établi à la date de publication de ce document.
 
Les destinataires de ce document s’engagent à ce que l'utilisation des informations y figurant soit limitée à la seule évaluation de leur intérêt propre en considération des stratégies visées. Toute reproduction partielle ou totale des informations ou du document est soumise à une autorisation préalable expresse de la Société.
 
Rédacteur : AXA Investment Managers Paris – Tour Majunga – 6, place de la Pyramide – 92908 Paris La défense cedex. Société de gestion de portefeuille titulaire de l’agrément AMF N° GP 92-08 en date du 7 avril 1992 S.A au capital de 1 384 380 euros immatriculée au registre du commerce et des sociétés de Nanterre sous le numéro 353 534 50

Investissement responsable

ESG et les rendements financiers : La perspective académique

Key points: 

  • An increasing amount of academic research is showing that the incorporation of environmental, social and governance (ESG) factors can potentially lead to better performance for both companies and their investors.
  • This is fundamentally dispelling the long-held stereotypical view that investing responsibly means sacrificing investment returns
  • In this document, we highlight a variety of academic research which demonstrates the positive link between ESG and financial performance
  • These studies support AXA Investment Managers’ ambition and commitment to integrating ESG factors into investment analysis, engaging investee companies and developing impact investing – as we believe it is in our clients’ long-term best interests to do so.

ESG delivers value to investors. This is our view and the key conclusion of this paper. This is supported by the rising amount of academic studies into responsible investing.

Below, the first section focuses on studies linking ESG factors as a whole - and looks at the relationships between corporate and investment performance – what could be dubbed “ESG alpha” – for different asset classes. Some studies consider ESG factors from both a risk i.e. exclusions point of view, as well as from a best-in-class/positive ESG momentum perspective.

The second part examines academic studies focusing on specific ESG issues, and their relationship with financial performance.

While we have made efforts to analyse studies which are robust and peer-reviewed, we cannot deny that there may be potential biases in other studies that undermine the strength of the findings. During our research, an issue we often came across was the misunderstanding between correlation and causality. The positive relationship between ESG and financial returns does not mean that the latter is caused by ESG factors.

Financial performance is driven by many other factors – not just ESG. On this issue, we tried to select studies with a sufficient level of control, to ensure relevant results. Other biases that exist includes selective use of data by researchers.

ESG integration and financial performance

Below, we highlight two publications which are meta-studies:

Friede, Busch & Bassen (2015)1 looked at more than 2,200 empirical studies on the link between ESG and corporate financial performance. The results show that approximately 90% of studies analysed found there was a relationship between ESG and financial performance – and a large majority of these showed this was a positive relationship.

University of Oxford (2015)2 looked at more than 200 academic studies, industry reports, newspaper articles and books. Among these sources, 88% indicated that companies with strong sustainability practices demonstrate better operational performance, which ultimately translates into cash flows. In addition, 80% showed that strong sustainability practices have a positive influence on investment performance.

Equities

In the equity asset class, some of the most interesting academic studies capture the relationship from a risk and return perspective.

Khan, Serafeim and Yoon from the Harvard Business School (2015)used ESG factors identified as financially material, on an industry-by-industry basis, by the Sustainability Accounting Standard Board (SASB). It found that firms scoring well on material ESG issues deliver up to 6% annualised alpha performance. In contrast, firms with good ratings on immaterial sustainability issues i.e. the “noise” of sustainability reporting, do not significantly outperform firms with poor ratings on the same issues.

Similarly, Sherwood and Pollard (2018)4 used ESG and non-ESG integrated emerging market indices. The paper looked at several return indicators - historical returns, beta, Sharpe ratio, Sortino ratio, conditional value at risk and Omega ratio. The results indicate significant outperformance of emerging market equities due to ESG integration.

When it comes to portfolio construction, Kempf and Osthoff (2007)5 adopted a simple strategy - buy stocks with high ESG ratings and sell shares with a low score. The paper indicates that it leads to high abnormal returns of up to 8.7% per year. Of note, the abnormal returns remain significant even after considering reasonable transaction costs.

Fixed Income

Ge and Liu (2015)6 studied firms’ Corporate Social Responsibility (CSR) performance and the relationship with the cost of new bond issuance. After controlling for credit ratings, it shows that better CSR performance is associated with lower yield spreads – even if some of the effect is absorbed by credit ratings. The results also indicate that firms with strong CSR performance can issue bonds at a lower cost.

The idea that good ESG performance leads to a decrease in bond yields is also supported by Oikonomou et al. (2014)7. The empirical analysis is based on an extensive longitudinal dataset. It suggests that overall, good ESG performance is rewarded and corporate social transgressions are penalised through lower and higher corporate bond yield spreads respectively.

Specifically, within the green bond market, researchers have examined the consequences of green bond issuance on issuers’ financial and investment performance. Flammer (2018)8 indicates that those issuing green bonds enjoy an improvement in operating performance and wider environmental practices.

Another study by Flammer (2019)9 looked at companies’ financial and environmental performance following the issuance of green bonds. It noted that the equity of the issuer saw an abnormal positive increase on the day of the green bond issuance being announced. This suggests that equity markets are responding to the green bond market. Notably, these results are only significant for green bonds that are certified by independent third parties (usually ESG rating agencies).

Engagement

At AXA IM, we believe that engaging with our investee companies is a vital component of our approach to responsible investment.10 We seek to identify a specific area where we use engagement as a method to drive change within investee companies. The aim of our engagement activity is to protect investor value and deliver increased performance over the long run.

A pioneering academic piece on the value of ESG engagement, in our view, was delivered by Dimson et al. (2012)11. This study of investor engagement with US companies over a 10-year period found successful engagement was followed by positive abnormal returns, at a +4.4% average. On the other hand, unsuccessful engagement has no impact on returns. In 201712, a follow-up study also looked at more than 1,800 collaborative engagements coordinated by the United Nations’ Principles for Responsible Investment. It found evidence that successful engagement is linked to increased return.

Figure 1: Cumulative abnormal returns around initial engagements

Source: Dimson et al. (2012)

Gond (2017)13 adopts a more qualitative approach. He highlights the benefits of engagement, in terms of sharing information and building knowledge, as well as in terms of shifting the internal political dynamics within companies - including escalating issues to board level.

From a risk perspective, Hoepner et al. (2018)14 looked at how engagement on ESG issues can benefit shareholders by reducing firms’ downside risk. Engagement appears most effective in lowering downside risk when addressing governance or strategy topics and when changes in firms’ social policies are coupled with governance improvements. The study finds corroborating evidence in that successful engagement reduces a company’s exposure to a downside-risk factor.

Exclusions

Exclusion of companies from sectors such as tobacco and controversial weapons is one of the longest-running approaches to responsible investment. Heinkel et al. (2001)15 showed that the cost of capital of companies excluded by green investors increased compared to the most environmentally sound corporations.

This result has been empirically supported by several papers, notably by Chava (2014)16. His paper finds that investors demand higher expected returns on stocks excluded by environmental screens compared to firms without environmental concerns. Lenders also charge a higher interest rate on bank loans issued to firms with these environmental worries.

However, the impact of ESG exclusions on portfolio performance can be seen differently. For instance, Hvidkjaer (2017)17 identified several studies with different conclusions around the performance of “sin stocks”. He finds that sectors like tobacco can have attractive characteristics, including their defensive characteristics in difficult market conditions.

Specific ESG issues and financial performance

Environment

Konar and Cohen (2001)18 highlighted the positive impact on the financial valuation of US companies through the creation of intangible asset value. The study relates the market value of firms in the S&P 500 to objective measures of their environmental performance. After controlling for variables traditionally thought to explain firm-level financial performance, it found that bad environmental performance is negatively correlated with the intangible asset value of firms.

Bauer and Hann (2014)19 used information on the environmental profile of 582 US companies between 1995 and 2006. With numerous controls applied to companies, bond characteristics, alternative model specifications and industry membership, the paper found that:

  • Environmental concerns are associated with a higher cost of debt financing and lower credit ratings
  • Proactive environmental practices are associated with a lower cost of debt.

Social

Academic research dedicated to social issues and financial returns rely on measurable factors, such as gender diversity and employee satisfaction. A widely quoted study, Edmans (2011)20, analysed the relationship between employee satisfaction and long-run stock returns. A value-weighted portfolio of the “100 Best Companies to Work for in America’’ earned an annual four-factor alpha of 3.5% from 1984 to 2009, and 2.1% above industry benchmarks.

These findings suggest three main implications. First, consistent with human capital-centred theories of the firm, employee satisfaction is positively correlated with shareholder returns and need not represent managerial slack. Second, the stock market does not fully value intangibles, even when independently verified by a highly public survey on large firms. Third, certain socially responsible investing (SRI) screens may improve investment returns.

Along with Li and Zhang, Edmans (2017)21 extended the work on employee satisfaction and stock returns to 14 countries. The study found that employee satisfaction, measured to lists of the “Best companies to work for”, is associated with superior long-run returns, current valuation ratios, future profitability, and earnings surprises. The results are valid in flexible labour markets, such as the US and UK, but not rigid labour markets, such as Germany.

With regards to gender diversity, AXA IM Rosenberg (2018)22 found that firms with higher diversity levels* are potentially associated with higher current profitability as well as higher future profitability. Among the most profitable firms, those with greater board diversity also showed a better ability to withstand competitive forces compared to their less diverse peers. When isolating the highest profitability companies, it finds that there is a possible ‘profitability moat’ that is attributable to higher diversity.

Source: AXA IM Rosenberg. Higher ROEX does not necessarily equate to outperformance.
“US Market” refers to the 1000 largest US companies over the period January 2005 – July 2017.

Governance

The key pieces we found around the governance pillar are related to shareholders rights and power. Gompers (2003)23 used an investment strategy that bought firms with the strongest shareholders rights and sold firms with the weakest rights. This strategy earned abnormal returns of 8.5% per year during the sample period. The study found that firms with stronger shareholder rights had higher dfirm value, higher profits, higher sales growth, lower capital expenditures, and made fewer corporate acquisitions.

Flammer (2015)24 adopted a slightly different approach, by looking at the effect of shareholder proposals related to Corporate Social Responsibility (CSR) on financial performance. The study focused on CSR shareholder proposals that pass or fail by a small margin of votes. Using a regression approach, it found that the adoption of a close call CSR proposals leads to positive stock market returns on announcement.

Sources: 

[1] Gunnar Friede, Timo Busch & Alexander Bassen (2015) ESG and financial performance: aggregated evidence from more than 2000 empirical studies, Journal of Sustainable Finance & Investment

[2] From the stockholder to the stakeholder: How sustainability can drive financial outperformance, University of Oxford and Arabesque Partners, 2015

[3] Corporate Sustainability: First Evidence on Materiality, Mozaffar Khan, George Serafeim, and Aaron Yoon, HBS, 2015

[4] Matthew W. Sherwood & Julia L. Pollard (2018) The risk-adjusted return potential of integrating ESG strategies into emerging market equities, Journal of Sustainable Finance & Investment

[5] Kempf, Alexander; Osthoff, Peer (2007): The effect of socially responsible investing on portfolio performance, CFR Working Paper, No. 06-10, University of Cologne, Centre for Financial Research (CFR), Cologne

[6] Ge, W., Liu, M. Corporate social responsibility and the cost of corporate bonds. J.Account. Public Policy (2015), http://dx.doi.org/10.1016/j.jaccpubpol.2015.05.008

[7] I. Oikonomou, C. Brooks, and S. Pavelin. The effects of corporate social performance on the cost of corporate debt and credit ratings. The Financial Review, 49:49–75, 2014. doi: 10.1111/fire. 12025.

[8] Flammer, Caroline. “Corporate Green bonds.” Working Paper, 2018

[9] Caroline Flammer, (2019), Green Bonds: Effectiveness and Implications for Public Policy in NBER Chapters, National Bureau of Economic Research, Inc

[10] Engagement activities are not conducted directly by Rosenberg Equities. No representation is made as to the outcomes of engagement activities.

[11] Active Ownership, Elroy Dimson, Oğuzhan Karakaş, and Xi Li, 2012

[12] Local leads, backed by global scale: the drivers of successful engagement, Elroy Dimson, Oğuzhan Karakaş, and Xi Li, 2017

[13] How ESG engagement creates value: Bringing the corporate perspective to the fore, Jean-Pascal Gond, 2017

[14] ESG Shareholder Engagement and Downside Risk, Andreas Hoepner and al., University College Dublin (2018)

[15] R. Heinkel, A. Kraus, and J. Zechner. The effect of green investment on corporate behaviour. Journal of Financial and Quantitative Analysis, 2001

[16] S. Chava. Environmental externalities and cost of capital. Management Science, 2014

[17] ESG investing: a literature review, Søren Hvidkjær, 2017

[18] Shameek Konar and Mark A. Cohen. Does the Market Value Environmental Performance? The Review of Economics and Statistics, 2001

[19] R. Bauer and D. Hann. Corporate environmental management and credit risk. Working paper, 2014

[20] Does the stock market fully value intangibles? Employee satisfaction and equity prices, Alex Edmans Wharton School, 2011

[21] Edmans, Alex, Lucius Li, and Chendi Zhang. “Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around The World.” European Corporate Governance Institute (ECGI) - Finance Working paper No. 433/2014. February 22, 2017.

*The study uses Asset4’s Board Diversity variable, which assigns a percentage diversity score to companies based on gender diversity and/or evidence of foreign board members. Companies are classified as ‘higher diversity’ if their Board Diversity score is greater than 20%, and ‘lower diversity’ if lower than 20%.

[22] Does Diversity Provide a Profitability Moat? AXA IM Rosenberg Equities, 2018

[23] Corporate governance and equity prices, Paul A. Gompers, Harvard Business School, Quarterly Journal of Economics, 2003

[24] Caroline Flammer (2015) Does Corporate Social Responsibility Lead to Superior Financial Performance? A Regression Discontinuity Approach. Management Science

 

Disclaimer

Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. References to league tables and awards are not an indicator of future performance or places in league tables or awards and should not be construed as an endorsement of any AXA IM company or their products or services. Please refer to the websites of the sponsors/issuers for information regarding the criteria on which the awards/ratings are based. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment.  Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.

Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

Consideration of ESG factors may limit the types and number of investment opportunities available. Under certain market conditions, an ESG integrated portfolio may underperform strategies that do not consider ESG factors. ESG considerations may also affect the portfolio’s relative investment performance depending on whether affected sectors or investments are in or out of favor at any given moment.  In addition, AXA Investment Managers may be unsuccessful in creating a portfolio exhibiting more positive ESG characteristics and/or which assigns more weight to such companies. The research identified above, may not necessarily be used, implemented, or otherwise considered in AXA Investment Manager’s own portfolio management activities, services, or products.

Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX.

In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

Vues d’Iggo

The Big H

We are consistently seeing technological progress towards the goal of de-carbonising our economies. Alternative energy is becoming cheaper and more and more activities have the opportunity to shift towards a lower carbon footprint. But there is a huge amount still to do. Meeting the Paris Agreement goal requires investors, governments, businesses and consumers to do more. Hopefully, the coronavirus has set us on a path to more rapid progress. The goal of a cleaner, greener future should encourage us all to minimise the risks and exploit the opportunities provided by choosing that over the catastrophic alternative. Investment can and needs to play a vital role.

Fill ‘er up, guv! 

Do you know that a hydrogen fuelled car is able to run for about 400 miles on one “re-fill”? At least that’s the claim in a review I read of one of the three hydrogen fuelled cars currently available on the UK market. Do you also know that there are currently only thirteen hydrogen refuelling stations in the UK? Hydrogen is the cleanest alternative to petrol and diesel, emitting only water and created using alternative energy sources. The entire process of producing the energy and running the vehicles has the potential to massively reduce CO2 emissions relative to conventionally fuelled vehicles. Not only that, it has broader energy uses. One of the leading manufacturers of electrolysers is based in the UK and supplies hydrogen technology for use in vehicles, as an input into the production of other chemicals and as a source of energy in powering electricity grids. Hydrogen is clean and efficient. Yet, today, we aren’t using it enough.

The big threat 

Yes, I know I normally write about the Fed or credit spreads or equity earnings forecasts. Recently, the investment outlook has been dominated by the pandemic and efforts to bring it under control and return economic activity to “normal” levels. The pandemic remains a serious threat and the challenge for investors is in assessing whether current market valuations truly reflect the impact of the pandemic on the global economy. However, climate change is arguably an even bigger existential threat. This week there have been reports of abnormally high temperatures in the Arctic Circle, potentially related to global warming. I attended a webinar about the net-zero ambition with panellists from an oil major and from a well-known activist NGO. As you would expect there was a certain amount of polarity between them but there was one message that was shared. Governments are not doing enough to accelerate the carbon transition. The urgency of the need to do more was noted and shared by all participants There should be more investment in the alternatives infrastructure and more done to speed up the shift in demand away from fossil fuels.  This should be THE investment theme for the ages.

Building on 2020? 

It has already been acknowledged that global CO2 emissions have fallen this year due to the collapse in global economic activity at the end of Q1. According to the International Energy Agency, full-year 2020 emissions could be as much as 8% lower than in 2019. Yet the risk is that once the COVID-19 crisis is over (herd immunity reached, vaccine or anti-viral drugs produced or there is a settlement between social distancing and business as usual), emissions will start to climb again. Meeting the Paris Agreement goal of restricting the rise in global temperature to below 2 degrees relative to pre-industrial times and meeting the net-zero carbon emissions target by 2050 remain super ambitious. Yet there is renewed hope as a result of the global reset that has happened in recent months. Consumer and business activities have changed and some of those changes will be permanent and beneficial. Policy makers have been brave with monetary and fiscal policy and have responded actively to the health crisis. Can they now be brave in accelerating the carbon transition policies?

What can Brussels offer? 

This weekend’s European Summit is important in this respect. Bond investors have been encouraged by the apparent progress towards greater fiscal mutualisation with the proposed Recovery Fund. The funding of that will create a new risk-fee asset in Europe, helping reduce systemic risk and reducing borrowing costs for the most economically challenged member states. The Euro has already benefitted in the foreign exchange markets (up 7.5% against the dollar since the March low) and the EuroStoxx 50 index has outperformed (in local currency terms) the S&P500 over the last three months. The political significance of what is happening in Europe is important but from an environmental point of view what the money from the fund is actually spent on is more important. The European Commission’s proposal for the fund is littered with references to green and digital and ambitions to improve the resilience of Europe’s health and environment. The devil, as always, will be in the details.

Reducing externalities through investment 

From the investment community side there is a huge potential to mobilise private savings even more towards environmental and social goals. It is clear to me, as a practitioner in asset management, that the pandemic has given new vigour to responsible investment. In fact I think we have shifted to a position where mainstream investment is responsible at its core now. Of course it should be. We invest to achieve greater utility in the future. That utility is not just about the wealth we will have amassed through saving and investing, but about what condition the world will be in when we, or future generations, get around to consuming it. Left unchecked, the negative externalities generated by economic activity will reduce that future utility (gross inequalities, recurrent epidemics, extreme weather, disruptions to supply and so on). Investment has to play a role in reducing these so that the future is better. Investment strategies are being shaped to minimise the exposure to risks – which may be monetised – associated with economic activities that negatively impact on society, the legal framework and the environment. At the same time, strategies are being shaped to maximise exposure to those companies that have fewer risks. More than that, investors can seek out the opportunities for growth as society confronts the challenges of the carbon transition, of sustainable agriculture, of more digitalisation and of recognising the benefits of diversity in all walks of life.

Risks and opportunities 

I could probably spend every remaining working day of my career engulfed in researching, investing in activities related to, and lobbying around, climate change. As asset managers we are consistently incorporating techniques and data sources to allow us to more accurately align portfolios with sustainable goals. This means trying to assess metrics like carbon intensity and the “temperature” of the invested assets. We are also searching for the opportunities in new technologies and companies that are changing their business models to become more sustainable, or indeed disrupting established practices. Hydrogen is just one example. I have also been reading about carbon capture, one variant of which is to extract carbon from the air and either store it underground or use it in the production of sustainable fuels and other materials. COVID-19 has also led to a huge amount of brainstorming amongst investors about how people’s lives will change – less leisure and business travel, changes in food consumption, more digitalisation, changes to the way healthcare is provided – and many more. It’s a scary and, at the same time, exciting time to be alive.

Costing carbon 

There is no question that we need to accelerate the move away from a reliance on fossil fuels. One way of doing that is to increasingly monetise the cost of externalities. That means charging for carbon usage (emissions) across broader sectors of the economy. Appropriately priced, demand for carbon would decline more quickly and would increase for alternatives or for carbon reducing activities. It is complex and radical because there would be winners and losers from essentially massively increasing the price of traditional energy sources. Energy companies would face losing assets and low-income consumers would be hit until alternative energy became cheaper and more widely available. Yet governments would raise money to finance income redistribution and fund new technology. Meeting the Paris Agreement goal requires huge levels of investment – some of that has to come from extracting the “cost” of carbon emissions. Yes, carbon pricing does exist today but its role is fairly limited. A more transparent, global price for carbon would also help us value companies more effectively – adjusting their cost for their carbon intensity to reflect whether their credit spreads or price-earnings ratios were a true, sustainable, value measure.

Green recovery 

After the 2008 crisis, governments responded by tightening the regulatory framework around the financial sector. It changed the economics of banking and asset management. Of course, the sector responded and changed. It remains profitable but it is much more responsible. Today, governments have a role to help further change the economics of energy. I look forward to hydrogen re-fuelling stations and electronic vehicle charging points being more numerous and accessible as petrol stations are today. Let’s hope “green recoveries” can deliver.

Not for Retail distribution: This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.

Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 7 Newgate Street, London EC1A 7NX.

In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

Deux minutes

Deux minutes pour s’informer sur les marchés financiers

Que faut-il retenir de la semaine passée ?

L’optimisme suscitée par le développement d’un vaccin contre le coronavirus a de nouveau soutenu les marchés mondiaux au cours de la semaine terminée jeudi[1]. L’économie chinoise a renoué avec la croissance au deuxième trimestre (T2) avec un PIB en hausse de 11,5 % en glissement trimestriel, contre une contraction de 10 % au T1. Toutefois, les ventes au détail ont été déprimées et les tensions croissantes entre les États-Unis et la Chine ont quelque peu freiné la reprise du marché. Le Beige Book de la Réserve fédérale américaine – son commentaire sur les conditions économiques – indique que l’activité a progressé dans presque tous les compartiments. Les cas de coronavirus continuent cependant d’augmenter aux États-Unis.

[1] Indice MSCI World NR exprimé en USD. Source : Factset au 16/07/2020

État du monde

La Banque centrale européenne (BCE) a laissé son programme de relance contre les effets du coronavirus et ses taux d'intérêt inchangés la semaine dernière, le taux de dépôt restant à -0,5 %. La présidente de la BCE, Christine Lagarde, note que les indicateurs économiques montrent une « reprise significative, bien qu’inégale et partielle » en mai et juin. De même, la Banque du Japon (BoJ) a maintenu ses taux d’intérêt inchangés à -0,1 %. L’institution a indiqué qu’elle prévoit une récession de 4,7 % pour l’année fiscale en cours en raison de la pandémie de coronavirus. Elle prévoit une croissance de 3,3 % en 2021.

Le chiffre de la semaine

7 millions

Selon l’Organisation des pays exportateurs de pétrole (OPEP), la demande mondiale de pétrole devrait se redresser et augmenter de sept millions de barils par jour (mb/j) en 2021, tout en restant inférieure aux niveaux antérieurs à la crise liée au COVID-19. Cette année, la demande de pétrole devrait se contracter de 8,9 mb/j. L’OPEP et ses alliés ont déclaré la semaine dernière que les baisses de production seraient plus limitées alors que l’économie mondiale commence à se remettre de la pandémie.

Eclairage

Destruction créative

L’idée selon laquelle les faillites libèrent de la main-d'œuvre et des capitaux qui vont être redirigés vers des secteurs plus productifs de l’économie, leur permettant d’être mieux employés à mesure que les innovations remplacent des produits et des services dépassés. Ce processus est accéléré pendant les récessions et devrait être particulièrement marqué dans le cas de la crise liée au COVID-19. Les réformes structurelles impulsées par les décisions politiques viseront à renforcer ce processus et à éviter le risque évident que l’effondrement des entreprises et de l’emploi cause des dommages permanents.

Prochaines échéances

Jeudi, la BoJ publiera le procès-verbal de sa dernière réunion de politique monétaire. Les données des indices préliminaires des directeurs d'achats (PMI) pour le mois de juillet au Japon seront connues mercredi. Jeudi, les données sur la confiance des consommateurs dans la zone euro et sur les demandes d’allocations chômage aux États-Unis seront publiées. Vendredi, les PMI préliminaires de juillet pour la zone euro, les États-Unis et le Royaume-Uni, ainsi que les ventes au détail du Royaume-Uni, seront divulgués.

L’investissement sur les marchés implique un risque de perte en capital.
 
Ce document est exclusivement conçu à des fins d’information. Il ne constitue ni un élément contractuel, ni un conseil en investissement. Il a été établi sur la base d'informations, projections, estimations, anticipations et hypothèses qui comportent une part de jugement subjectif. Ses analyses et ses conclusions sont l’expression d’une opinion indépendante, formée à partir des informations disponibles à une date donnée.
 
Ainsi, compte tenu du caractère subjectif et indicatif de ces analyses, nous attirons votre attention sur le fait que l'évolution effective des variables économiques et des valorisations des marchés financiers pourrait s'écarter significativement des indications (projections, estimations, anticipations et hypothèses) qui vous sont communiquées dans ce document. En outre, du fait de leur simplification, les informations contenues dans ce document peuvent n’être que partielles. Elles sont susceptibles d'être modifiées sans préavis et AXA Investment Managers n’est pas tenu de les mettre à jour systématiquement.
 
Toutes ces données ont été établies sur la base d’informations rendues publiques par les fournisseurs officiels de statistiques économiques, et de marché. L’ensemble des graphiques du présent document, sauf mention contraire, ont été établi à la date de publication de ce document.
 
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Analyses et stratégies d’investissement

Analyse du langage ; un nouvel outil pour décoder les messages de la Fed ?

Key points

  • New quantitative analysis techniques have paved the way to explore alternative data sources. By using natural language processing techniques, economists can systematically study transcripts such as central banks’ publications, newspaper articles or company statements to identify patterns and draw conclusions.
  • We focus our study on the US economy by analysing the minutes to Federal Open Market Committee (FOMC) meetings and the ‘Beige Book’ – a qualitative summary of US economic conditions.
  • Translating these transcripts to sentiment scores, we illustrate common patterns with US GDP growth. We highlight the latest Beige Book report, published on 15 July, points to a strong rebound in activity between end of May and beginning of July. We also provide extra insight into the FOMC minutes by highlighting the most discussed topics during the committee and their evolution over time.

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