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Alliance Bernstein

PRI reporting framework 2019

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » Implementation processes

Implementation processes

FI 01. Incorporation strategies applied

Indicate (1) Which ESG incorporation strategy and/or combination of strategies you apply to your actively managed fixed income investments; and (2) The proportion (+/- 5%) of your total actively managed fixed income investments each strategy applies to.
SSA
0 Screening alone
0 Thematic alone
100 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (financial)
0 Screening alone
0 Thematic alone
27 Integration alone
73 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
27 Integration alone
73 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Securitised
0 Screening alone
0 Thematic alone
100 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%

01.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

The majority of our fixed income assets are managed using Integration. Our primary reason for choosing the integration strategy is that it most directly reflects our long-held philosophy on environmental, social, and governance ("ESG") factors, and is also most seamlessly aligned with our existing investment processes. AB has long recognized that ESG issues can impact the performance of investment portfolios, and we have long believed that the integration of ESG factors is critical to the success of a fundamental research process. As such, our analysts have carefully assessed ESG factors in their analysis if they believe those factors have, or could have, a material impact on our forecasts and investment decisions.

AB continues to strengthen the integration of ESG factors into our fixed income research and investment processes. Please see additional information below.

01.3. Additional information [Optional].

We continued to implement a more detailed ESG scoring system for our corporate issuers. We have a specific module within our Credit Research database that explicitly links the ESG rating each analyst assigns an issuer to the broader forward credit rating that issuer will receive, ensuring that ESG considerations are explicitly considered and weighted in AB's proprietary overall forward rating for each issuer.  In this way, our ESG scores have a direct influence on security selection decisions within our portfolios.

In December 2018, we launched a centralized ESG research tool that provides a standard ESG materiality framework and is used to capture ESG research and engagements across our Equities business unit globally.  The tool will also capture our fixed income analysts’ research views, and these analysts will have access to the tool so we are able to share ESG viewpoints and engagements across asset classes.

During 2018, we also continued to expand our efforts in impact and sustainable thematic investments.

We have managed a US Municipal Impact strategy since 2016, and continued to expand this strategy during 2018 to a broader range of clients and investment platforms, with assets now totalling over USD 400 million. The US municipal bond market is ripe with opportunities to invest in underserved communities and have social/environmental impact. It also allows us to meet the growing demand from our diverse client base and to provide investment strategies that deliver not only return, but also social/environmental benefits. Our US Municipal Impact strategy also provides ample opportunity to engage with issuers on ESG concerns.  During 2018, we engaged on health issues, particularly the opioid crisis, and issues involving access to healthcare in underserved rural areas.  We also engaged in collaboration with other organizations on juvenile justice reform. 

Our Impact strategy has an established investment structure in which municipal research analysts-in addition to their traditional fundamental analysis-score each issuer on Environmental, Social and Governance criteria. Bonds with an "impact score" below a certain threshold are not eligible for investment in the Municipal Impact Strategy.

Additionally, to meet the growing global investor interest in sustainability, we have developed a Sustainable Global Thematic Credit Strategy.  The strategy- expected to be seeded in the first half of 2019 -  invests in fixed income issuers whose businesses are aligned with the United Nations Sustainable Development Goals. 

We also utilize ESG screening within portfolios, primarily at our clients' direction as described later in this document. 


FI 02. ESG issues and issuer research

02.1. Indicate which ESG factors you systematically research as part of your analysis on issuers.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
Environmental data
Social data
Governance data

02.2. Indicate what format your ESG information comes in and where you typically source it

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

Indicate who provides this information  

02.3. Provide a brief description of the ESG information used, highlighting any differences in sources of information across your ESG incorporation strategies.

We use a range of external ESG data providers, carefully selecting them to meet not only our high overall standards but also to meet certain product-specific needs. Our ESG Research Providers include:

MSCI: MSCI provides ESG ratings and qualitative research. This information is accessed by our analysts through a link into our analysts' research database. This research can "flag" potentially material issues that our analysts then incorporate into their own analysis.     We also use MSCI for negative screening in client portfolios, as well as best in class screening, including to code the resulting restricted securities in our pre- and post-trade compliance systems and trading platforms. We also subscribe to MSCI's Carbon Metrics tool to understand, measure and manage carbon risk in portfolios.

ISS-Ethix: We use Ethix for controversial weapons screening associated with our Luxembourg-based Fund platform and a number of client Portfolios.

Finally, we also utilize a variety of other external data sources, such as sell side research, NGO articles and industry body reports. 

02.4. Additional information. [Optional]


FI 03. Processes to ensure analysis is robust

03.1. Indicate how you ensure that your ESG research process is robust:

03.2. Describe how your ESG information or analysis is shared among your investment team.

03.3. Additional information. [Optional]


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