AXA Investment Managers (AXA IM) is now including ESG targets in the pay of its senior executives.
The deferred compensation of around 400 people that will start to be paid in 2024 will be affected.
AXA IM’s action comes after the Financial Conduct Authority (FCA) announced last week it had begun consulting the investment industry on linking remuneration with sustainability outcomes.
“We increasingly expect firms to assess and integrate material sustainability risks, opportunities and impacts into their operations and financing activities,” a discussion paper from the FCA on the issue said.
Pay ESG criteria
Alongside existing pay criteria, AXA IM will use certain ESG metrics according to the employee’s business area and remit in pay decisions.
Weighted average carbon intensity (WACI), to reach the target of 25% reduction in carbon intensity for corporate portfolio by 2025, is one such criteria.
For the ESG part of the deferred compensation, this metric accounts for 75% for AXA IM Core and 37.5% for transversal functions employees in scope.
Another criteria is an assets under management target for 50% of the real estate portfolio to be aligned to the Carbon Risk Real Estate Monitor trajectories by 2025.
This impacts ESG-related pay of 75% for AXA IM Alts and 37.5% of transversal functions employees in scope.
A third pay criteria is the reduction of the corporate operational CO2 footprint, to reach the interim target to reduce it by 26% by 2025.
This metric accounts for 25% of the ESG part of the deferred compensation for all AXA IM Core, AXA IM Alts and transversal functions employees in scope.
This new policy is reflected in the AXA IM for Progress Monitor, a set of criteria that sits alongside the fund house’s financial targets and indicators.
It has eight metrics for net-zero targets around the themes of decarbonisation, engagement, and solutions to consciously channel capital to companies and projects that can help accelerate the transition to net zero.
Progress towards these targets will be reported annually from 2023.
Marco Morelli, executive chairman of AXA IM, said: “As we further put sustainability at the heart of everything we do, transparency and regular reporting on our progress and the challenges we may face is crucial.
“We are choosing to visibly position our non-financial targets alongside our financial ones and to increasingly onboard our organisation to make our employees a part of our sustainability journey.”