If building a sustainable bond portfolio sounds tidy and straightforward, it isn’t. The auto industry illustrates the difficulty of finding a perfectly sustainable private sector investment.

General Motors and Ford Motor have made significant commitments to building out their electric vehicle lines in recent years. Electric vehicles are responsible for about 65% less greenhouse gas emissions than gasoline-powered cars annually.¹

That percentage could rise as renewable power continues to grab market share from coal-fired electric utilities, thereby playing a greater role in fueling electric cars. Yet General Motors and Ford Motor also currently rely heavily on sales of relatively fuel-inefficient trucks and SUVs.

Why not just invest in Tesla Motors, which makes only electric vehicles? Tesla’s products are great for the environment, but the company has struggled with its manufacturing process and confronted some well-publicized governance issues. The company itself presents some ESG risks that many long-term investors would want to think carefully about, even though Tesla’s products further some of the United Nations’ Sustainable Development Goals (SDGs).

In other words, no automaker is perfect from a sustainability perspective. Ultimately, we think it’s worth supporting traditional car companies’ transition to electric vehicles, even if they don’t overhaul their entire vehicle lineups overnight. In fact, we believe it’s imperative to invest in companies that are trying to make progress toward sustainability.

Engaging with Management Is Crucial

But that doesn’t mean bond issuers hold all the cards. Companies regularly need fresh injections of capital. And bonds are a major source of funding for the auto industry and a more stable funding source than equity, making it crucial to issuers on the road to sustainability.

By engaging with companies and bankers on ESG matters and bond structures, investors can be clear about the types of objectives and key performance indicator (KPI) targets they believe reflect best practices. Even if a company fails to set acceptable terms with a current bond issue, a continuing engagement program can secure better terms in future. And asset managers must engage frequently with management about ESG issues to ensure that leadership teams abide by their promises in developing products, services and practices that support the SDGs.

Fixed-income asset managers don’t need to stand alone in holding bond issuers accountable. It’s helpful to rely on multiple partners, including industry organizations that engage and advocate for changes, and in-house resources such as partners in equities portfolio management and responsible-investing experts who span asset classes.

Asking companies to participate in building a greener, more just world isn’t easy—but the more voices that demand change, the sooner a sustainable future will arrive. It’s up to investors to ensure that it arrives on time.

¹The figure includes only emissions during the owner’s operation of the car. US Department of Energy, “Alternative Fuels Data Center: Emissions from Electric Vehicles,” Energy Efficiency & Renewable Energy (website) (May 20, 2022), https://afdc.energy.gov/vehicles/electric_emissions.html.

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. Views are subject to change over time.

About the Author
Erin Bigley, CFA
Erin Bigley is a Senior Vice President and Head of Fixed Income Responsible Investing. In this role, she oversees the Fixed Income team's responsible investing strategy, including integrating environmental, social and governance (ESG) considerations throughout the team's research, engagement and investment processes. Bigley also oversees fixed-income ESG thought leadership and product development. She is a member of the firm's Responsible Investment Steering Committee. Bigley joined the firm in 1997 and previously served as a portfolio manager and trader for the global and Canadian bond strategies. She spent two years based in London as the global head of Fixed Income business development for institutional clients. Bigley served as a Fixed Income senior investment strategist for over a decade, most recently as head of the strategist team from 2018 to 2021. She holds a BS in civil engineering from Villanova University and an MBA from the Massachusetts Institute of Technology's Sloan School of Management. Bigley is a CFA charterholder. Location: New York.

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AllianceBernstein

AllianceBernstein

AllianceBernstein (AB) is a leading global investment management firm that offers diversified investment services to institutional investors, individuals, and private wealth clients in major world markets.

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) considerations into most of our actively managed strategies (approximately 79% of AB’s actively managed assets under management as of December 31, 2024).

Our purpose—to pursue insight that unlocks opportunity—describes the ethos of our firm. Because we are an active investment manager, differentiated insights drive our ability to design innovative investment solutions and help our clients achieve their investment goals. We became a signatory to the Principles for Responsible Investment (PRI) in 2011. This began our journey to formalize our approach to identifying responsible ways to unlock opportunities for our clients through integrating material ESG factors throughout most of our actively managed equity and fixed-income client accounts, funds and strategies. Material ESG factors are important elements in forming insights and in presenting potential risks and opportunities that can affect the performance of the companies and issuers that we invest in and the portfolios that we build. AB also engages issuers when it believes the engagement is in the best financial interest of its clients.

Our values illustrate the behaviors and actions that create our strong culture and enable us to meet our clients' needs. Each value inspires us to be better: 

• Invest in One Another: At AB, there’s no “one size fits all” and no mold to break. We celebrate idiosyncrasy and make sure everyone’s voice is heard. We seek and include talented people with diverse skills, abilities and backgrounds, who expand our thinking. A mosaic of perspectives makes us stronger, helping us to nurture enduring relationships and build actionable solutions.
• Strive for Distinctive Knowledge: Intellectual curiosity is in our DNA. We embrace challenging problems and ask tough questions. We don’t settle for easy answers when we seek to understand the world around us—and that’s what makes us better investors and partners to our colleagues and clients. We are independent thinkers who go where the research and data take us. And knowing more isn’t the end of the journey, it’s the start of a deeper conversation.
• Speak with Courage and Conviction: Collegial debate yields conviction, so we challenge one another to think differently. Working together enables us to see all sides of an issue. We stand firmly behind our ideas, and we recognize that the world is dynamic. To keep pace with an ever changing world and industry, we constantly reassess our views and share them with intellectual honesty. Above all, we strive to seek and speak truth to our colleagues, clients and others as a trusted voice of reason.
• Act with Integrity—Always: Although our firm is comprised of multiple businesses, disciplines and individuals, we’re united by our commitment to be strong stewards for our people and our clients. Our fiduciary duty and an ethical mind-set are fundamental to the decisions we make. 

As of December 31, 2024, AB had $792B in assets under management, $555B of which were ESG-integrated. Additional information about AB may be found on our website, www.alliancebernstein.com.

Learn more about AB’s approach to responsibility here.

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