Responsible Investment Policy

Environmental

• Issues include climate change, environmental policies, environmental management, pollution, release of toxic chemicals, water availability, water consumption, water sourcing, energy consumption, packaging and other materials, and genetic engineering.
  
  
• Sectors with a more significant impact on the environment include electric utilities, coal and minerals, oil and gas and chemicals. These sectors may be subject to waning demand by trends for energy conservation and the development of more environmentally friendly alternatives.

Social

• Issues include stakeholder (including labour) relations, working conditions, child and forced labour, health and safety, product safety, anti-corruption and anti-money laundering, community investment, treatment of customers and supply chain management.

Governance

• Important corporate governance issues include board structure (e.g. separation of Chairman and CEO, number of independent directors and their length of service), board skills, board diversity, management turnover, executive remuneration, shareholders’ rights, accounting quality, audit quality, the extent of related party transactions and management turnover, as well as regulatory issues.

Details relating to ownership by our major asset classes (fixed income, equities, real estate, and external managers) is as follows:

a. Fixed Income

AIA’s investment objective is to produce stable and consistent income and returns, which means that we allocate a large proportion of our investment portfolio to fixed income securities, especially long-dated debt securities.

The financial impact of ESG issues can be material on fixed income assets. We aim to actively invest in companies with lower ESG risk -- this should not only generate alpha but create a more sustainable business in the long term. We believe that the consideration of ESG issues is consistent with the responsibility of an investment manager to maximise returns.

As noted above, analysis and engagement is performed primarily at the country level for fixed income investment. Coordination of ESG analysis and engagement, however, is performed at the Group level by the Group Investment department.

b. Equities

Consideration of ESG issues is included as part of equity investment criteria. We seek to invest in companies which have demonstrated sound ESG performance and who have noted their commitments to further improvement. ESG factors are considered during our research analysis and are evaluated together with our corporate financial and earnings forecasts before an investment decision is made.

Similar to fixed income, most of our equity ESG analysis is performed at the country level. As we also have regional equity analysts, coordination of both country and regional ESG analysis and engagement is performed at the Group level by the Group Investment department.

c. Real Estate

At AIA we understand the significant impact that both the construction and operation of buildings may have on the environment. The consideration of ESG issues is one of our key strategies to execute over the life cycle of an investment, which includes acquiring the land or asset, developing building(s), and implementing high quality property management with ongoing reporting of asset performance.

The overall sustainability and environmental impact from a building is always a key consideration in our real estate acquisition. For new developments, we incorporate green standards as an integral part of the design concept and implement these in the construction phase.

Green and sustainable initiatives also extend to our property management, where we pursue sustainable initiatives in the operation of our buildings. This can reduce the environmental footprint created from our buildings while also helping to lower day-to-day operational costs.

As investment in real estate assets is coordinated between country and Group Investment teams, the ownership of the ESG assessment and engagement process is led by the Group Investment department.

Many managers, through their ESG practices, commit significant resources to people, capital and ideas to create a lasting impact on society and the environment. ESG issues can affect the performance of investment portfolios and therefore managers should incorporate ESG reviews in their research activities in accordance with this policy.

We consequently take ESG factors into consideration when selecting third party managers at AIA. The monitoring of ESG practises by external managers is led by the Group Investment department. 

AIA is committed to helping people live Healthier, Longer Better Lives across the region, and addressing the risk factors associated with non-communicable disease As such we exclude any institutions involved in tobacco manufacturing from our investment portfolio.

The Oslo Convention on Cluster Munitions outlines commitments to prohibit the use and manufacture of cluster munitions. Cluster munitions are controversial weapons that pose a high risk to civilians, with some of our markets having signed this treaty. AIA therefore excludes any investment any issuers manufacturing cluster munitions.

AIA is also member of the Principles of Responsible Investment, having joined as an asset owner in 2019. 

AIA will update this document in line with any revisions to our ESG position in accordance with regulation, stakeholder feedback, or any international charters or principles. 

If you have questions on this document, please contact our ESG team at esg@aia.com.

Last updated: 11 April 2019