March 2021 | Issue 232
Axa IM leads as ESG grows in European CLO industry
Sayed Kadiri headshot
Sayed Kadiri
European CLOs are increasingly launching with express ESG mandates embedded as issuers seek to get ahead of what appears to be an inevitable shift towards ethical investing.
Axa Investment Managers’ alternatives business has been an early adopter, with the unit having integrated ESG considerations across all investments. Christophe Fritsch, co-head of securitised credit and global head of structuring and business development in structured finance at Axa IM Alts, says the firm — which is a large investor in CLOs — extended this policy in 2019 by requesting all CLO managers exclude certain industries from their CLO pools.

“We have developed our own framework for European loans and aim to assign an ESG score to 80% of the loans within our investable universe by the end of the year from 60% today,” says Paris-based Fritsch.
“We want to play an active role”
Christophe Fritsch, Co-head of securitised credit | Axa IM Alts
The Axa alternatives unit plans to analyse CLOs through two lenses: by assigning a score to each CLO and on a collateral manager’s approach to ESG across its platform. This, says Fritsch, ensures commitment from managers beyond their CLO portfolios.
About 20% of European CLO managers have put in place an ESG investment methodology, says Fritsch, and Axa IM is in discussions with stakeholders to increase standardisation, as some ESG-branded CLO issuers have a firm-wide ESG policy, but not all have firm-wide exclusion lists.
New European CLO managers are at the forefront of the ESG movement. Creditflux data shows that AlbaCore, Bridgepoint, Capital Four, CBAM, Fair Oaks, Palmer Square and Permira — which have debuted in the European CLO market over the past two years — have all assembled ESG-branded CLOs.
The most recent newcomer, Neuberger Berman, has also prioritised ESG. Neuberger Berman Loan Advisers European CLO 1, which priced last month, will assess whether its assets comply with United Nations’ sustainable development goals.
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Global credit funds & CLO's
March 2021
| Issue 232
Published in London & New York.
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