Investment Institute
Environmental

Putting ESG to work: A case study in the telecoms sector

  • 26 March 2021 (5 min read)

The global policy and regulatory environment is changing fast, pushing companies towards more sustainable practices and encouraging investors to change too. Environmental, social and governance (ESG) factors have become a fundamental route to assess corporate health. But as more companies seek to address ESG, how can investors make meaningful assessments about their relative progress?

At AXA IM we have more than 20 years’ experience of building responsible investment strategies1 and have set up detailed methods that inform and guide our fixed income managers.

In some areas that is straightforward: investments in energy companies require deep knowledge of how climate change and associated regulations will affect business models. But we also see ESG having powerful effects in sectors that at first glance do not lie on the front line.

This article will examine how AXA IM analysts handle certain ESG issues, challenges and opportunities in the telecommunications sector, and how their work can potentially bring value to investors.

Making ESG sector specific

Telecoms companies face the same problem as many others when it comes to ESG analysis – there is a huge range of potential inputs and criteria that make up the full picture, but harmonization of data across players, and how they report it, remains quite low. Our first step is to look top down at the fundamental drivers and specificities of the sector in question, and then to examine how those apply to key ESG issues.

One example of this in telecoms is in the exponential rise in connectivity needs and data traffic, that will be further exacerbated by the rollout of 5G. According to GSMA, the mobile communications industry association, the 5G era could result in a potential rise in traffic data of up to 1,000 times. Factoring in the infrastructure to cope with it, this could lead to the consumption of two to three times as much energy2 . According to France-based think tank The Shift Project and depending on different assumptions for traffic growth and energy efficiency, the digital industry could emit up to 5% to 6% of the world’s carbon emissions by 2025, or even more in certain scenarios.

  • AXA IM was given its first first RI mandate in 1998 with the goal of supporting sustainable job creation in France.
  • GSM Association
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    This website is published by AXA Investment Managers Asia (Singapore) Ltd. (Registration No. 199001714W) for general circulation and informational purposes only. It does not constitute investment research or financial analysis relating to transactions in financial instruments, 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 prepared without taking into account the specific personal circumstances, investment objectives, financial situation or particular needs of any particular person and may be subject to change without notice. Please consult your financial or other professional advisers before making any investment decision.

    Due to its simplification, this publication 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 publication is provided based on our state of knowledge at the time of creation of this publication. 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 investment involves risk, including the loss of capital. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested.

    Some of the Services and/or products may not be available for offer to retail investors.

    This publication has not been reviewed by the Monetary Authority of Singapore.