Submitted by AllianceBernstein
Christian DiClementi| Lead Portfolio Manager—Emerging Market Debt
Patrick O'Connell, CFA| Director—Fixed Income Responsible Investing Research
Patrick O'Connell: At AllianceBernstein, we feel like we have a differentiated way to approach ESG investing. We have a 360-degree view of analyzing ESG risks from all parts of a company or country's stakeholders. Further, we have our proprietary methodology to bring that information to bear, to score that fairly. Christian, can you talk us through your approach to investing in sovereigns with an ESG-considerate lens?
Christian DiClementi: The way we think about investing in sovereigns from an ESG perspective is very much aligned with how we think about investing in corporates from an ESG perspective. Clearly, governance concerns rank quite high whenever we take on a new sovereign investment.
PO: Can you walk me through a specific example of how ESG materially impacted a country's bonds?
CD: Suriname would be a great example. In 2016, the country came to market touting plans of increased transparency, strong governance and separation of power. A few years after the country issued, we started to notice some red flags, particularly around transparency, as the government was unwilling to release some important financial data we deemed critical for the investment.
PO: After the government failed to release that information, what was the end result? What happened to bond prices?
CD: Well, by 2020, about four years after their debut issuance, the country defaulted on their debt. And because the issuer has been unable to resolve or achieve a comprehensive debt restructuring with investors, those investors are now left with meaningful losses, upwards of 30%. So these ESG considerations are not only impactful from an environmental, social and governance perspective, but they're also very impactful for client outcomes.
PO: Thanks, Christian, for your insights today. We can clearly see that ESG risks are true credit risks.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time. AllianceBernstein Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.
About the Authors
Christian DiClementi is a Senior Vice President and Lead Emerging Market Debt Portfolio Manager at AB. He is also a member of the Global Fixed Income, Absolute Return and Income portfolio-management teams, and oversees emerging-market investments across AB's suite of fixed-income products. DiClementi joined the firm in 2003. Prior to becoming a member of the Emerging Market Debt portfolio-management team in 2013, he served as a member of AB's Economic Research Group, focusing mainly on sovereign fundamental research for the Caribbean, Central American and Latin American regions. Previously, DiClementi worked as an analyst in the firm's Quantitative Research Group, with an emphasis on global sovereign return and risk modeling, and as an associate portfolio manager responsible for municipal bond portfolios. He holds a BS in mathematics (summa cum laude) from Fairfield University. Location: New York
Patrick O'Connell, CFA is a Senior Vice President and Director of Fixed Income Responsible Investing Research. In this role, he is part of the leadership team that develops responsible investment strategy across AB's Fixed Income business, particularly related to integrating environmental, social and governance considerations throughout the team's research and engagement. Previously, O'Connell served as a corporate credit research analyst, focusing on emerging-market corporates in Latin American and African countries. He joined the Emerging Markets research team in 2013 after working as a credit analyst covering US high-yield energy credits at AB. Prior to joining the firm in 2012, O'Connell was a desk analyst at UBS Investment Bank, where he helped to allocate capital on the trading desk. He holds a BS in accounting and finance (magna cum laude) from Villanova University and is a CFA charterholder. Location: New York
AllianceBernstein (AB) is a leading global investment management firm that offers high-quality research and diversified investment services to institutional investors, individuals, and private wealth clients in major world markets. We believe corporate responsibility, responsible investing and stewardship are intertwined. To be effective stewards of our clients’ assets, we strive to invest responsibly—assessing, engaging on and integrating material issues, including environmental, social and governance (ESG), and climate change considerations in most of our actively managed strategies. We also believe that being a responsible firm allows us to be more responsible investors. Our stewardship practices, investment strategy and decision-making are guided by our purpose, mission and values.
Our purpose—pursue insight that unlocks opportunity—inspires our firm to act responsibly. While opportunity means something different to each of our stakeholders; it always means considering the unique goals of each stakeholder that go beyond the desire for financial returns. AB’s mission is to help our clients define and achieve their investment goals, explicitly stating what we do each day to unlock opportunity for our clients. We became a signatory to the Principles for Responsible Investment (PRI) in 2011. This formalized our commitment to identify responsible ways to unlock opportunities for our clients through ESG integration in most of our actively managed equity and fixed-income client accounts, funds and strategies.
Because we are an active manager, our differentiated insights drive our ability to deliver alpha and design innovative investment solutions. ESG and climate issues are key elements in forming insights and in presenting potential risks and opportunities that can have an impact on the performance of the companies and issuers that we invest in and the portfolios that we build.
Our values provide a framework for the behaviors and actions that deliver on our purpose and mission. Values align our actions. Each value emerges from the firm’s collective character—yet is also aspirational. Each value challenges us to become a more responsible version of AB.
As of December 31, 2022, AB had $646B in assets under management, $445B of which were ESG-integrated. Additional information about AB may be found on our website, www.alliancebernstein.com.
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