AB High Income A AGDAX Sustainability

AllianceBernstein has built a credible, research-backed program of climate investing and engagement in recent years. The firm continues to augment its already-strong environmental, social, and governance resources despite a significant departure. As its approach to ESG integration is less robust compared with leaders in the space, AB maintains an Advanced Morningstar ESG Commitment Level. AB’s ESG resources continue to lend an edge over peers. When former head of responsible investing Michelle Dunstan departed in October 2022, AB veteran Erin Bigley swiftly took the reins. Bigley has been at AB in various roles for more than 25 years and oversees roughly a dozen dedicated ESG professionals who work with portfolio managers and develop proprietary tools that track ESG data, research, and company engagements. The fixed-income team benefits from additional expertise by way of AB’s Fixed Income Responsibility Team, while a handful of ESG analysts serve the more boutique-style equity side of the business. ESG analysis and integration covers the firm’s active equity and fixed-income offerings (approximately two thirds of assets as of June 2022), but its impact varies across portfolios. Portfolio managers retain discretion when weighing ESG considerations, and although integration is largely standardized across the firm’s fixed-income group, each team within the firm’s equities division takes a distinct approach. The expansion of AB’s thematic impact investing series that launched more than five years ago maintains its momentum. These offerings target specific social and environmental objectives in line with the United Nations Sustainable Development Goals. For example, the Luxembourg-domiciled AB Climate High Income fund launched in 2021, and it invests with debt issuers that enable the transition to a low carbon economy, support people and infrastructure in adapting to climate change, and develop technological solutions to the climate crisis. Science-based climate investing is a major priority for the firm, as evidenced by its collaboration with The Earth Institute at Columbia University. Since the partnership’s inception in 2019, more than 250 AB investment professionals have completed the codeveloped climate science and investing curriculum. This alliance has also produced a wealth of thought leadership on topics such as carbon emissions, global food security, and impact investing through municipal bonds. Climate research guides AB’s active ownership strategy, too. It was one of the earliest members of the Climate Action 100+ investor coalition in 2017, and it has co-led a number of successful engagements. For example, in 2021, AB advocated for the closure of coal plants in Chile, and four major Chilean energy companies committed to phase out their coal plants over the coming decade. AB also worked with regulators to subsidize power for consumers affected by heightened energy prices incurred by impending closures, ensuring a just transition. AB’s record of support for ESG-related shareholder proposals stands out among peers, and the proxy-voting policy offers a detailed picture of its priorities for ESG issues. Still, room for improvement remains. The firm doesn’t disclose its rationale for all proxy votes, and those it publishes come through after a delay. Additionally, AB’s engagement policy could outline a clearer link between environmental and social priorities and specific expectations for engagement outcomes. It will need to keep progressing to stay ahead of peers in a competitive ESG investing landscape.