(Reuters) — The fund arm of French insurer Axa said Monday it would take a tougher line with oil and gas companies over their environmental impact, selling out of laggards after three years if their emissions-reduction plans were not good enough.

As part of an overhaul of its sector investment policy announced at the COP26 climate talks in Scotland, Axa Investment Managers also introduced a set of new exclusions “to mitigate the adverse impacts of the industry on the environment.”

Axa and its peers have undertaken to reach net-zero carbon emissions across their portfolios, with big cuts needed by 2030 in order to meet mid-century targets.

A landmark International Energy Agency report this year said that, in order to keep global climate goals within reach, no more new oil and gas fields should be developed after this year.

“If we don't see progress and strong commitments from companies, we need to be ... ready to divest,” said Marco Morelli, executive chairman of Axa IM, in a statement.

"The road to net zero is all about transition. We must give companies the time to adjust but we must also adopt a no-compromise approach with investee companies that don’t take climate change seriously."

Axa IM said that beginning in early 2022 it would exclude any company for which oil sands represent more than 5% of total production, down from a previous 20% threshold.

It would also divest from companies that get more than 10% of their production from the Arctic Monitoring and Assessment Programme region, and from companies reliant on shale or fracking for more than 30% of output.

Axa IM said it would engage with oil and gas companies not captured by the tougher exclusions — including oil majors such as Exxon Mobil and BP — over their climate objectives.

It would divest from them after three years "if sufficient progress has not been achieved," based on whether companies had set timely science-based targets in line with a sector framework from the non-profit Science Based Targets initiative, due this year.