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AB: Sustainable Challenges Sharpen Equity Investing Opportunities
AB: Sustainable Challenges Sharpen Equity Investing Opportunities
Published 08-26-22
Submitted by AllianceBernstein
“The investment landscape has been difficult for sustainable portfolios this year... But we don’t have less of a climate crisis, health crisis or social crisis," says Dan Roarty, AB’s CIO of Sustainable Thematic Equities. Listen to Dan as he discusses how sustainable challenges sharpen equity investing opportunities.
Transcript
The investment landscape has been much more difficult for most sustainable portfolios since the fourth quarter of last year.
One thing that we know is that the sustainability challenges that these stocks are connected to haven’t gone away. We don’t have any less of a health crisis. We don’t have any less of a climate crisis. We don’t really have any less of a social crisis. If anything, the economic challenges that we face are even deepening. So the opportunities for these companies to provide solutions aren’t less than they were; they’re, if anything, greater than they were. So the opportunities are still there for sustainable investing.
But in periods of heightened risk aversion, which we’re clearly going through, a lot of investors shorten their time horizon and a lot of sustainable opportunities, as we know, are longer term.
So our job is to look at longer-term opportunities. That’s where we can be different than the consensus with our research. That’s where the inefficiencies in the market live. None of the sustainability opportunities have changed in the last nine months. They’re all still there.
We can look at temperatures around the world; we can see very clearly that we still have an ongoing climate crisis. The opportunities aren’t different. We have 134 countries that represent 90% of global GDP that have committed to getting us towards net zero by 2050. Those opportunities are still there.
There’s an obvious energy crisis that the war in Ukraine has exacerbated. But one of the outcomes of that is that Europe is committed to decarbonize a decade sooner than they would’ve otherwise. So the climate opportunity isn’t smaller. It’s larger.
Similarly, our health theme is just as vibrant as it ever was. That includes things like medical innovation and drug discovery, lab testing, which are still desperately needed because the COVID crisis hasn’t gone away. It also includes food security and clean water provision. And again, we’ve seen how around the world, partly because of rising temperatures, partly because of global conflict, the food crisis is only getting bigger.
We invest in high-quality businesses, and one of the characteristics of high-quality businesses is fundamental business resilience. When times are tough, they’re more stable; their earnings tend to hold up better than the broader market, and that’s exactly what we’re seeing. Investors in sustainable, high-quality companies haven’t been paid for that this year, but we think they will.
Learn more about Responsible Investing at AB in our Responsibility Report.
AllianceBernstein
AllianceBernstein
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.
- Invest in One Another means that we have a strong organizational culture where diversity is celebrated and mentorship is critical to our success. When we invest in one another, we empower our employees to reach their potential, so that they can help our clients realize theirs. This enables us to partner with clients to design and deliver improved investment outcomes.
- Strive for Distinctive Knowledge means that we collaboratively identify creative solutions to clients’ economic, ESG and climate- related investment challenges through our expertise in a wide range of investment disciplines, close collaboration among our investment experts and creative solutions.
- Speak with Courage and Conviction informs how we engage our AB colleagues and issuers. We seek to learn from other parts of our business to strengthen our own views. And we engage issuers for insight and action by sharing ideas and best practices.
- Act with Integrity—Always is the bedrock of our relationships and has specific meaning for our business. Unlike many other asset managers, we’re singularly focused on providing asset management and research to our clients. We don’t engage in activities that could be distracting, or create conflicts—such as investment banking, insurance writing, commercial banking or proprietary trading for our own account. We are unconflicted and fully accountable.
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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