Organisation details
Name: AXA Investment Managers subsidiary AXA IM Alts
Signatory type: Investment manager
HQ country: France
AUM: AXA IM €844bn as of end 2023; AXA IM Alts €183bn
Covered in this case study:
Asset class(es): Private equity, private debt, project finance
Geography: Global
AXA IM Alts is one of AXA Investment Manager’s alternative investments platform, and manages the firm’s direct real estate, alternative credit, infrastructure, natural capital and impact investments. Through its alternative assets impact investing strategies, AXA IM Alts deploys capital to projects and companies that generate positive environmental and social outcomes while meeting clients’ financial objectives.
Why we focus on protecting and restoring nature and biodiversity
Climate change is regarded as one of the biggest challenges facing the world today. Increasing incidences of extreme weather conditions are affecting an ever-wider circle of people and businesses.
In addition, the reliance on natural capital for resource extraction, both land based and marine, accounts for significant ecosystems degradation and biodiversity loss. Land use change, particularly for agricultural use, is one of the most important drivers of biodiversity loss and the unprecedented rate of species extinction, according to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services. This is particularly true in tropical and subtropical forests, which are home to over half of the world’s biodiversity, provide habitat to threatened species and support the livelihoods of over 1.5 billion people in rural communities.
The people dimension to these challenges, while universal, falls most heavily on the world’s poorest regions. Poor rural communities rely on natural resources for their livelihoods, food production and water supplies. Sustainable use of these resources is essential if these communities are to prosper.
As investors, we recognise that the potential loss of biodiversity and related ecosystem services endangers not only populations but the businesses that depend on them. There is a material financial and investment imperative driving the protection of nature. A report from the World Economic Forum demonstrates that over half of the world’s GDP is highly or moderately dependent on nature. Nature provides important direct inputs for many sectors, from pharmaceuticals to agribusiness, as well as providing indirect benefits for other sectors. An intentional focus on protecting and restoring nature and its inherent biodiversity will enable investors to mitigate risk and enhance opportunities.
A key aspect to solving these challenges is closing the significant financing gap needed to conserve ecosystems, foster sustainable solutions and protect vulnerable communities. It is estimated that the world will need to invest trillions by 2030 to combat these global challenges.
How we finance natural capital restoration and protection
AXA Group has a long-standing commitment to the conservation of natural capital, ecosystems and biodiversity protection, and the associated climate change mitigation benefits that result from investing in nature-based solutions. In 2019, in partnership with WWF France, AXA Group published a report – Into the Wild: integrating nature into investment strategies – which highlighted the economic and financial impacts of “bankrupting” nature and how investors can help reverse nature loss through their investment strategies. This commitment was underpinned in October 2021 by the establishment of a natural capital target whereby AXA dedicated €1.5bn of investment capital to the protection and restoration of nature.
The AXA Natural Capital Fund, managed by AXA IM Alts, translates this objective into real-world impacts. The fund finances projects that implement a range of nature-based solutions, such as afforestation, restoration and avoided deforestation and related solutions, including nature-tech investments that enhance the delivery of the nature-based solutions. While the fund invests globally, projects supported are principally in emerging markets, where habitats and ecosystems of global importance are typically located.
The fund’s impact objectives are conservation of natural capital, climate change mitigation and biodiversity. It invests in projects at scale to impact key performance indicators at investment and portfolio level including:
- area of land protected, measured in hectares
- area of land restored, measured in hectares
- area of land sustainably managed, measured in hectares
- area of land for critical habitats and species, measured in hectares
- climate benefit measured in tonnes of CO2e emissions avoided, reduced, removed or sequestered
To align the interests of local stakeholders with our climate and biodiversity objectives, we actively monitor and measure the socio-economic contributions of our investments to local communities, in addition to managing environmental, social and governance risks.
Ultimately, the fund will achieve its objectives by providing financing that:
- catalyses ecosystem conservation, resulting in the direct protection of primary natural capital, for example forested land, peatland and mangroves;
- promotes sustainable land use programmes that alleviate incursion into protected primary natural capital and provide enhanced livelihood opportunities for stakeholder communities, for example smallholder farmers;
- ensures that ecosystem services provided by nature are valued properly.
Example: Restoring the Brazilian Amazon rainforest
The Brazilian Amazon rainforest is experiencing mass deforestation of around 1 million hectares per year, a result of the expansion of cattle farming and production of agricultural commodities. This scale of deforestation contributes to climate change and destroys natural capital, with negative consequences for habitats and the Amazon’s native flora and fauna.
The AXA Natural Capital Fund has provided US$49m of project finance to reforest degraded cattle pastures using tree species native to the Brazilian Amazon. The fund has also provided equity financing to project developer Mombak, a carbon-removals company, to enhance its operational and technological systems and the delivery of the impact objective.
The project will buy or rent degraded pastureland in Brazil and plant over 60 species of native trees to establish new conservation forests on approximately 300,000 hectares of previously degraded land. The newly established forests will be managed for 50 years before being legally converted into permanently protected forests; ensuring that climate and biodiversity benefits are long term and durable.
The project is expected to contribute significantly to climate and biodiversity objectives by enhancing flora and fauna biodiversity. In the first 50 years, over 1.5m tonnes of CO2 will be sequestered, generating credible and verified carbon credits and other ecosystem services. After 50 years, each hectare restored will yield 300-600 tonnes of CO2 per hectare in emissions reductions.
