As the global head of Axa Investment Managers’s €157bn alternatives business unit, Isabelle Scemama has an insight into institutional investor appetite for real assets and the push towards environmental, social and governance (ESG) principles.

“The low interest rate environment has been prolonged by the pandemic, making real estate and all private asset classes even more appealing for investors, because they are offering extra returns, compared with fixed income,” she says. 

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Ms Scemama says that residential and logistics assets in particular have benefitted from this environment, due to undersupply in some cities, the continuation of urbanisation and acceleration of e-commerce. 

“Those two asset classes are critical,” she adds, noting that Axa IM is the largest residential manager in Europe, with some €20bn worth of assets. In January 2021, Axa IM entered a strategic partnership with In’li, a subsidiary of French semi-public body Groupe Action Logement, to build nearly 20,000 new housing units in Île-de-France within 10 years. 

“We like this kind of segment, because we know rents are affordable and it addresses the imbalance in supply and demand in the Paris area,” she says, adding that Axa IM can actively improve ESG and the management of these large residential developments.

Digital and health

Ms Scemama notes digital infrastructure as an asset class that has outperformed during the pandemic. Axa IM has invested heavily in fibre broadband and operates Data4, a European platform of 21 data centres.

Life sciences is another area catching particular attention from investors. In November 2020, Axa IM acquired the Dutch science park and lab office developer Kadans in a €500m private equity deal.

“There is a recognition from all investors that this asset class will benefit from a need among tenants in the scientific community to find an ecosystem in which they can collaborate,” says Ms Scemama, noting that close proximity to universities is particularly important in this sector.

Axa IM, which operates as the investment arm of global insurance giant Axa and manages a portfolio on behalf of institutional and retail clients, makes investments into a mix of greenfield and existing projects. But when it comes to renewable energy, Ms Scemama notes that “greenfield investment is a perfect fit”, although the asset manager still explores existing projects.

“The cost of renewable energy production is starting to be quite competitive. More and more, we are entering into projects with long-term purchase power agreements,” she says, highlighting Axa IM’s partnership with Spanish renewable energy company Acciona as an example.

ESG hurdles

As Axa IM progresses towards its ESG targets, including a goal to have a portfolio with net-zero carbon emissions by 2050, there remain several challenges.

“The most critical hurdle to tackle is collection, access and quality of data,” says Ms Scemama, adding that for private assets, notably infrastructure and real estate, data is already readily available and collected.

After years of data-collection experience, Ms Scemama says she is confident about Axa IM’s trajectory to reduce carbon emissions, adding that carbon offsetting compliments this and their renewable investments.

“Bringing institutional capital into sectors capable of carbon sequestration — and to manage those assets in a sustainable manner — is clearly an improvement for the planet,” she adds, noting that this ensures natural assets, such as forests, are not mismanaged. Beyond creating impact in specific asset classes, Ms Scemama is convinced that ESG is also a way to attract talent.

“When you do things well and deliver on financial and environmental performance, you attract new investors and talent. It is a super exciting journey,” she says. n

This article first appeared in the October/November print edition of fDi Intelligence. View a digital edition of the magazine here.