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Alliance Bernstein

PRI reporting framework 2018

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You are in Direct - Listed Equity Incorporation » ESG incorporation in actively managed listed equities » Implementation processes » (C) Implementation: Integration of ESG issues

(C) Implementation: Integration of ESG issues

LEI 08. Review ESG issues while researching companies/sectors

08.1. Indicate which ESG factors you systematically research as part of your investment analysis and the proportion of actively managed listed equity portfolios that is impacted by this analysis.

ESG issues

Proportion impacted by analysis
Environmental

Environmental

Social

Social

Corporate Governance

Corporate Governance

08.2. Additional information. [Optional]

As noted above, AB has long believed that bottom-up ESG integration is important to identify investment risks as well as opportunities.  As such, our long-standing disciplined research process has long included ESG factors. All of our fundamental analysts assess carefully whether ESG factors could have a material impact on our forecasts and investment decisions. They conduct thousands of management and company visits per year and routinely investigate environmental, social and governance issues as an integral part of their fundamental research of a stock.

In addition, our dedicated ESG Analyst works with our  investment teams to identify ESG trends and, themes, and routinely provide our investment teams with  ESG-related case studies that illustrate best practices in integrating ESG factors into investment decision-making.

Finally, the Head of Responsible Investment dedicates a significant portion of her time on ESG-related activities, including keeping abreast of ESG best practices and relevant trends, and then using those insights to enhance our firm’s processes for ESG integration in our various investment disciplines. She conducts ESG training for our analysts and portfolio managers.

 


LEI 09. Processes to ensure integration is based on robust analysis

09.1. Indicate which processes your organisation uses to ensure ESG integration is based on a robust analysis.

09.2. Indicate the proportion of your actively managed listed equity portfolio that is subject to comprehensive ESG research as part your integration strategy.

09.3. Indicate how frequently third party ESG ratings that inform your ESG integration strategy are updated.

09.4. Indicate how frequently you review internal research that builds your ESG integration strategy.

09.5. Describe how ESG information is held and used by your portfolio managers.

          A number of teams keep systematic records of ESG research and meetings.   We are building a centralized database to be used across Equities.
        

09.6. Additional information.[Optional]

We track company meetings in our global company calendar. This includes the majority of our company  face-to-face engagements. It does not track the specific meeting agenda or items discussed, such as ESG topics.
We also have an engagement database to capture ESG-related engagements and ESG integration examples. Given the volume of analyst interactions with companies, and the wide variety and materiality of ESG issues discussed, we do not capture every single discussion, but we focus on the most significant engagements.  A number of strategies capture how ESG information and research was incorporated into investment decisions systematically.  


LEI 10. Aspects of analysis ESG information is integrated into

New selection options have been added to this indicator. Please review your prefilled responses carefully.

10.1. Indicate which aspects of investment analysis you integrate material ESG information into.

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

Proportion of actively managed listed equity exposed to investment analysis

10.2a. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

10.3. Describe how you integrate ESG information into portfolio weighting.

In our research reviews, our analysts discuss their investment thesis with the portfolio manager, including ESG issues and how they may impact to their thesis. The portfolio manager makes the final portfolio decision of whether to buy/sell/hold the company, as well as the weight in the portfolio. The portfolio manager may decide to underweight or overweight a position based on a variety of factors, including ESG risks or opportunities.  

 

10.4a. Describe the methods you have used to adjust the income forecast / valuation tool

Our teams within Equities take a variety of different approaches to adjusting forecasts and/or valuation tools. For example, our Global Core Strategy uses a proprietary quantitative scoring model to compute the discount rate adjustment for Environmental, Social and Governance factors that is an input to the valuation framework. Our Sustainable Global Thematic strategy systematically includes the output of their ESG analysis in the cost of equity. If ESG risks are deemed high, they will increase the cost of capital; if risks are low, they may lower the cost of capital.  

Proportion of actively managed listed equity exposed to investment analysis

10.2b. Indicate which methods are part of your process to integrate ESG information into fair value/fundamental analysis and/or portfolio construction.

10.4b. Describe the methods you have used to adjust the income forecast / valuation tool

As part of the valuation process, we adjust the cost of capital.  If ESG risks are deemed high, they will increase the cost of capital; if risks are low, they may lower the cost of capital.   

10.5. Additional information.


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