Shade Duffy, Head of Corporate GovernanceAXA Investment Managers

5 June 2018

Sustainable Investing for Financial Mutuals

Not for Retail distribution. This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Circulation must be restricted accordingly.

Sustainability and the role of insurance

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Risk carrier role

(financial risk management)

Sustainable development challenges & opportunities

Risk manager

role

Investor role

(physical risk management)

(asset management)

For illustrative purposes only. UN Environment’s Principles for Sustainable Insurance Initiative – Butch Bacani, Programme Leader, Global Insurance Supervision Conference, 2017.

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Sustainable InvestingEnvironment, Social and Governance (ESG) – Key Influencers

Environment Social Governance

Carbon emissions

Energy efficiency

Fines due to pollution

Labour / management relations

Occupationalsafety

Supply chainmanagement

Independence of the board

Protection of shareholders rights

Remuneration

For Illustrative purposes only. Source: AXA IM as of 31/12/2017.

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ESG is the ‘Front Page’ you want to avoidGreater risk of substantial financial consequences

For Illustrative purposes only. Sources: *The Guardian as of 16/01/18 ** CNN Money as of 24/12/17 ***The Guardian as of 07/06/17 ****The Guardian as of 14/07/17 *****France 24 as of 17/01/18

*

**

***

****

*****

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For young generations, the first objective is to improve the society before generating profits

““• Energy transition law

in France• Global initiative of the

FSB to increase transparency

• New financing instrumentseg green bonds

• Strong growth sectorseg green real estate, green infrastructure, clean tech

$2.7Bn: Googleof market capitalisation erased in 2017

Antitrust rules violation for its online shopping practices: monopoly abuse

Condemnation: BPIn 2018, the courts condemned BP in the Gulf of Mexico spill

Regulation

Cost

Generational shifts

Reputation

Green economy

Structural trends

of Millennialsare interested in responsible & impact investments**

86%

$68 trillion AUM represented by signatories to the UN-supported Principles for Responsible Investment (PRI), as of 2017*

80% of Global AUM

ESG

ESG: Sources of risks and opportunities

For Illustrative purposes only. * Source: UN-supported PRI – 2017, PWC Asset & Wealth Management Revolution: Embracing Exponential Change’ – 2017 ** Source: Morgan Stanley Sustainable Signals

Why Sustainable Investing?Sources of risks and opportunities

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Changing how capital markets operate

Changing consumer priorities

Greater financial consequences

Changing how we invest

2Increasing regulation

3Increasing social

conscienceRisk mitigation

1

New investment opportunities

4

Source: AXA IM. For illustrative purposes only.

Risk mitigation - Greater financial consequences

Social Governance

Environmental disaster

Deepwater Horizon

Supply chain management

Rana Plaza accident Bangladesh

Governance failure€26bn in market cap

erased in 2015

ESG

Source: AXA IM. Examples are for illustrative purposes only. No representation is made that these examples are past or current recommendations, that they should be bought or sold, nor whether they were successful or not.

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Real financial impactESG factors are intertwined, affecting competitive advantage and performance

Environment

Samarcodisaster

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Regulation is an important driver Changing how capital markets operate

COP21 sends a strong global signal France sends a strong regulatory signalThe French government involves the financial sector

The French Energy Transition law - the details

Following the law passed in August 2015, the decree specifies the conditions and application criteria for all concerned investors

Energy transition law enters into forceExplain and demonstrate the integration of ESG criteria into investment decisions

Focus on the means used to contribute towards the transition to a low-carbon economy

Creating ESG labelsThe French government created two financial products labels incorporating ESG criteria

December2015

June2017

December2015

January2016

For Illustrative purposes only. Source: AXA IM as of 31/12/2017.

Section 1 – ESG criteriaRequires the annual disclosure of integration of ESG criteria in the investment policies of concerned investors

Section 2 – Climate changeRequires the annual disclosure of the means implemented by concerned investors to help the transition towards a low-carbon economy

Explaining the

approach

Measuring risk

exposures

Actingon the

investment policy

Energy Transition Law

European Commission Action Plan: Financing Sustainable Growth

For Illustrative purposes only. Source: European Commission as of 31/03/2017

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Foster transparency and long-termism in

financial and economic

activity

Reorient capital flows

towards sustainable

investment, in order to

achieve sustainable and

inclusive growth

Manage financial risks stemming from climate

change, environmental

degradation and social

issues

1 2 3

The action plan has significantly leveraged from the recommendations of the High-Level Expert Group’s

Final Report, and sets out a strategy and roadmap for further work which combines both

legislative and non-legislative actions with a timeline of initiatives to be taken between Q2 2018

and Q3 2019

Three main objectives

Source:1 Morgan Stanley Sustainable Investment Trends , April 2016. 2 The 2016 US Trust Insights on Wealth & Worth® Survey, based on a survey of 684 individuals in the US with at least $3 million in investable assets. 3 UN PRI 2011-2015. 4 Mercer Global Investor Survey on Climate Change, 2013.

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Increasing social conscience Changing consumer priorities

A major generational shift regarding the role of finance

Capital markets have to adapt to changing needs

Global megatrends

Globalisation & technology

Resource scarcity

Changing demographics

82% of High Net Worth Millenialsare interested in sustainable investments1

+70% increase in PRI

signatories, representing

$59 trillionin AUM

53% of US Women either own or expressed an interest in Impact investments2

81%of asset owners and

68%of asset managers view climate

change as a material risk or opportunity across

their portfolio4

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Investment opportunities Changing the way we invest

2 Bank of America Research, Dec 2015.

Impact investing is expected to grow from $50bn (estimated) to between

$1 to $2 trillion by 2020/251

The green bond market in 2015 is $100bn2 and projected to reach

$350bn in 2018

3 US Green Building Council Study, 2015.4 McKinsey Global Institute, Sept 2015.5 KPMG & CB Insights, The Pulse of Fintech, Q3 2016,16/11/16.

$50bn

$1 trillion

$2 trillion

$100bn

$350bn

New markets New instruments Thematic opportunities

1 What is the Market Potential of Impact Investing? (Issue brief). Global Impact Investing Network.

Green certified buildings can command up to 30% price premium3

Green infrastructure gaining traction

+30%

Gender diversity$12 trillion could be added to global GDP by 2025 by investing in the advancement of women’s equality4

FintechNew technology is enabling low-cost financial inclusion.

Global funding for finteachtotalled $17.8bn at the end of Q3’165

Fiduciary dutyFour major considerations

For illustrative purposes only. Source: 1 Stranded assets illustration - Carbon Tracker Initiative. 2 2013 Cone Communications Social Impact Study

High-Level Expert Group (HLEG) on Sustainable Finance in Europe

REGULATIONRISK MANAGEMENT & STAKEHOLDERS

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Millenials are more likely to buy from those companies that support solutions to specific social issues 2

89%of Millenials2

HUGE ADDRESSABLE MARKETSFossil fuel energy which, at some time prior to the end of their economic life, are no longer able to earn an economic return1

STRANDED ASSETS

The Changing Investment Paradigm

*PRI: Principles for Responsible Investment: initiative of the Secretary General of the United Nations, set up by the United Nations Environment Program Finance Initiative (UNEP FI) and the UN Global Compact.

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2007

2010

2013

2015

20011998

1st RI Mandate

Creation of a dedicated RI team

AXA IM signs PRI*

Mainstreaming of ESG strategy into

investment process

Integration of ESG criteria for AXA Group

Launch of ImpactInvestingprogram2008

RI SearchPlatform

International Award for Best Investor

Reporting on climate-related risks : AXA

Group

2016 1st Wave

SRI

“Best in class”

2nd Wave

ESG

“Integration in financial analysis”

3rd Wave

POSITIVE IMPACT 2017

Label SRI and TEEC obtained for several

RI funds

Sources: FT.com, The Guardian, reit.com, Harvard Business Review, The Prudential Regulation Authority , Reuters, Money Marketing, Asia Insurance Review

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A better tomorrow starts today

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Important Information

This document is intended for Professional Clients under MiFiD (2004/71/EC) only and must not be relied upon by retail clients. 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 (2004/39/CE), 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 personalised 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.

The views expressed do not constitute investment advice, do not necessarily represent the views of any company within the Group and may be subject to change without notice. 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.

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.

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