Sustainable Investing for a Changing Environment · 2020. 10. 13. · Daniel Roarty –CIO,...
Transcript of Sustainable Investing for a Changing Environment · 2020. 10. 13. · Daniel Roarty –CIO,...
Daniel Roarty – CIO, Sustainable Thematic Equities
Empowering Transitions to a Better World
Sustainable Investing for a Changing
Environment
October 2020
The ES AllianceBernstein Sustainable US Equity Fund is a Sub Fund of ES AllianceBernstein UK OEIC, an open-ended investment company. Equity Trustees Fund
Services Ltd is the Authorised Corporate Director of the Fund. This document is issued by AllianceBernstein Limited, 50 Berkeley Street, London W1J 8HA.
AllianceBernstein Limited is authorised and regulated in the UK by the Financial Conduct Authority (FCA-Reference Number 147956).This document is directed at
Investment Professionals in the UK only. It is provided for marketing purposes but does not constitute investment advice or an invitation to purchase any security or
other investment. The views and opinions expressed in this document are based on our internal forecasts and should not be rel ied upon as an indication of future market
performance. Past performance is no guarantee of future returns. This document is not intended for public use. For Investment Professional use only. Not for
inspection by, distribution or quotation to, the general public.
1
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
…and Increasing Climate Disasters
…Its Grave Economic Consequences…
The World Finds Itself at a Crossroads
Dealing with the COVID-19 Pandemic…
…Social Unrest, Around the World…
Source: AB
2
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
How Can an Equity Investment Approach Empower Positive Transitions?
Three Pillars of Sustainable Investing
Sustainable
Themes
Active
Ownership
ESG
Integration
Portfolio themes are aligned with key secular
growth trends
We engage company management teams on
material issues
ESG factors are a key component of our investment process
ESG: environmental, social and governance
Source: AB
3
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
We Face Peak Crisis in Three Key Areas
Man-made climate change will have
profound effects on economies and
people around the world—especially
those of us living at sea level.
We face many challenges to human
health, not just in the form of disease,
but also accidents and the access to,
and affordability of, healthcare.
The divide between rich and poor
has been exacerbated by central bank
policies, regressive tax regimes,
inequality of opportunity, and the digital
divide.
Carbon Emissions Healthcare Inequality
Source: AB
4
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
Connecting Macro Trends & Investment Themes
Climate Crisis
Health Crisis
Inequality Crisis
Climate Transition Themes
Cleaner Energy Resource Efficiency
Sanitation & Recycling Sustainable Transportation
Health Transition Themes
Access to Quality Care Food Security & Clean Water
Medical Innovation Well Being
Empowerment Transition Themes
Educational Services Financial Security & Inclusion
Information & Communication Technology Sustainable Infrastructure
Source: AB
5
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
UN Sustainable Development Goals Provide a Map for Thematic InvestorsThe Goals Represent Tremendous Investment and Social Opportunity
As of 30 September 2020
Source: UN and AB
The SDGs are a Powerful Framework of 17 Goals Why Align a Portfolio with the SDGs?
The Sustainable Development Goals (SDGs)
offer a road map for identifying thematic
opportunities that are underappreciated
by traditional investors
The goals address challenges relating to economic
prosperity, environmental sustainability and
social inclusion
Thematic
Relevance
Investment
Opportunity
Global
Consensus
Social and
Environmental
Objectives
The estimated investment required to
achieve the SDGs is massive—roughly
US$90 trillion
Investments that align with the SDGs can
help to end poverty, protect the planet
and improve the lives and prospects
of everyone, everywhere
193 nations committed to achieving the
goals, signaling broad global consensus
and creating a powerful tailwind for
aligned companies
6
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
Deep Understanding of SDGs and Related Products Drives Universe Creation
A minimum of 25% of revenue from aligned products is required for universe inclusion.
As of 30 September 2020.
Source: UN and AB
Proprietary Analysis of UN’s SDGs Identifies Aligned Thematic OpportunitiesDeep Research, Bolstered by Big Data, Sharpens Investment Focus
Identify Products That Help Achieve the SDGs*
140 Sustainable Products and Services
Create Investment Universe
2,500 Companies Generating Revenues from
Sustainable Product Sales*
Analyze SDGs for Investment Opportunities
Focus on Private Sector Solutions to the World’s Biggest Challenges
Recognize Misalignments
Exclude Alcohol, Coal, Gambling, Pornography, Prisons,
Tobacco, Weapons
7
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
Three Primary Themes
Supported by Dynamic, Narrow and Definable Sub-Themes
Sustainable Themes Provide Compelling Investment OpportunitiesThemes Expected to Persist, Irrespective of Changing Geopolitical or Economic Factors
Health EmpowermentClimate
Sub Themes
Cleaner Energy
Resource Efficiency
Sanitation and Recycling
Sustainable Transportation
Sub Themes
Access to Quality Care
Food Security and Clean Water
Medical Innovation
Well Being
Sub Themes
Education and Employment
Services
Financial Security and Inclusion
Information and Communication
Technologies
Sustainable Infrastructure
Source: AB
8
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
There can be no guarantee that any investment objectives will be achieved. *IRR: internal rate of return. This analysis targets a portfolio IRR of 12%–15% based on the weighted average of analyst estimates for individual securities in the portfolio.
Source: AB
Private Equity-Like Mentality Focuses on Economic Value Creation
Think like long-term private-equity owners
to capitalize on market’s short-term focus
Sector experts develop a range of
proprietary five-year financial forecasts
Misunderstanding of ESG and sustainability
factors creates exploitable inefficiencies
Forward-looking risk analysis balances
ESG and traditional risk factors
Utilize propriety mapping process to
evaluate and quantify most material risks
Leverage proprietary scoring methodology
rather than 3rd party ratings to estimate risk
Estimate Return Potential (IRR)* Estimate Risk (Cost of Equity)
Environmental
Governance
OperationalFinancial
Time
Price
ESG Integration Improves Research & Stock Selection
Strategic Social
Invest Based on (Return-Risk)
Spread
Use the (Return-Risk) spread to
assess relative stock attractiveness
Stocks with high spreads generally have
stronger appeal
Target portfolio IRR of 12%–15% and
(Return-Risk) spread of +300 b.p.*
Investment
Attractiveness
Return
Risk
Compound
Annual Return
Hurdle
Rate
9
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
Engagement Is Fundamental to Sustainable InvestingActive Engagement Enhances Both Research Outcomes and Social Impact
Engagement Purpose Activities
Meet with management and board to discuss impact,
strategy and response to ESG issues
Develop in-house view on current ESG credentials
instead of relying on simplistic and backward-looking
third-party ratings
Research
Encourage firms to improve their business activities
and responsibility practices to create additional
shareholder value
Focus on company-specific material issues as well
as thematic topics across portfolio companies
Impact
ESG: environmental, social and governance
Source: AB
10
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
Sector weights and holdings are subject to change. For illustrative purposes only. Numbers may not sum due to rounding.
Numbers are net of cash.
As of 30 June 2020
Source: S&P and AB
Sector Exposure and Top Holdings2Q:2020
Sector Overview (Percent) 10 Largest Holdings
Security Name Weight (%) Theme
Bio-Rad Laboratories 3.1 Health
West Pharmaceutical Services 3.1 Health
Microsoft 3.0 Empowerment
Salesforce.com 2.9 Empowerment
MSCI 2.9 Empowerment
Danaher 2.9 Health
Procter & Gamble 2.8 Climate
Intercontinental Exchange 2.7 Empowerment
ANSYS 2.7 Climate
Waste Management Inc. 2.5 Climate
Total 28.7%
33.7
19.0
12.1
9.4
7.9
3.8
2.8
2.4
1.3
7.7
27.5
14.6
10.8
8.0
10.1
3.1
7.0
2.5
2.8
10.8
2.8
Technology
Healthcare
Consumer Discretionary
Industrials
Financials
Utilities
Consumer Staples
Materials
Real Estate
Communication Services
Energy
Cash
AB Sustainable US Thematic Equity Strategy S&P 500
11
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
Investment theme weightings are subject to change. References to specific securities are presented to illustrate the application of our investment philosophy only and are
not to be considered recommendations by AB. The specific securities identified and described herein do not represent all of the securities purchased, sold or recommended for the
fund, and it should not be assumed that investments in the securities identified were or will be profitable. Holdings are subject to change.
As of 30 June 2020
Source: AB
Holdings by Theme
Access to Quality Care
Alcon
Danaher
STERIS
UnitedHealth Group
Food Security and Clean Water
Ecolab
Xylem
Medical Innovation
Bio-Rad Laboratories
Bruker
ICON
LabCorp
West Pharmaceutical Services
Well-Being
lululemon athletica
Financial Security and Inclusion
Aflac
Intercontinental Exchange
MSCI
PayPal
Charles Schwab
Square
Visa
Info. and Communication Technologies
Ciena
Keysight Technologies
Lumentum Holdings
Microsoft
NVIDIA
Proofpoint
Salesforce.com
SBA Communications
Zendesk
Cleaner Energy
NextEra Energy
Resource Efficiency
ANSYS
Apple
Flex
Home Depot
Monolithic Power Systems
Nike
NXP Semiconductors
Procter & Gamble
Rockwell Automation
Starbucks
Trex
Sanitation and Recycling
American Water Works
Waste Management Inc.
Sustainable Transportation
Aptiv
Cree
Tesla
Health: 27.7% Empowerment: 35.5% Climate: 36.8%
12
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
Past performance does not guarantee future results. *Performance from 1 July 2013 reflecting management team change. The ES AllianceBernstein Sustainable US Equity Fund launched on 13 March 2020 and there is insufficient
data to provide past performance for the Fund. The ES AllianceBernstein Sustainable US Equity Fund is not managed to target or exceed the performance of any specific
benchmark, nor is the Investment Manager constrained by any benchmark. The Strategy performance referenced demonstrates AB’s capabilities. Inception date 31 December 1981.
Although similar, the performance of the composite will not be the same as that of the ES AllianceBernstein Sustainable US Equity Fund, given the different investment period.
Periods of more than one year are annualized. Numbers may not sum due to rounding. This is supplemental information to the GIPS-compliant performance and disclosure page.
The returns presented above are gross of fees. The results do not reflect the deduction of investment-management fees; the client’s return will be reduced by the management fees
and any other expenses incurred in the management of its account.
Source: S&P and AB; see Performance Disclosure
Periods Ended 30 September 2020
Q3
2020
YTD
2020
One
Year
Three
Years
Five
Years
Since Team
Change*
AB Sustainable US Thematic (GBP) 7.8% 24.7% 25.5% 20.0% 21.8% 19.8%
S&P 500 Index 4.1% 8.2% 9.8% 13.7% 17.8% 15.5%
Relative Performance +3.7% +16.5% +15.7% +6.3% +4.0% +4.3%
AB Sustainable US Thematic Equity StrategyPerformance Summary (GBP)
13
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
AB Sustainable US Thematic Equity StrategyOverview
Past performance does not guarantee future results. There is no guarantee the investment objective will be achieved.‡Beta is a measure of an investment’s sensitivity to the market as a whole. A beta below 1 indicates lower sensitivity to the market; a higher beta indicates higher sensitivity.
The ES AllianceBernstein Sustainable US Equity Fund is not managed to target or exceed the performance of any specific benchmark, nor is the Investment Manager constrained
by any benchmark
As of 30 September 2020
Source: S&P and AB
Characteristics
Index S&P 500
Number of Holdings 30–60
Active Share 80%–85%
Beta‡ 0.95–1.10
Turnover 30%–70%
Capitalization Mid/Large
Seeking Superior Financial and Social Outcomes
Sustainable
Themes
Active
Ownership
ESG
Integration
Portfolio themes are aligned with key
secular growth trends
We engage company management teams on
material issues
ESG factors are a key component of our investment process
14
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
ES AllianceBernstein Sustainable US Equity Fund (OEIC)Offering investors access to AB’s successful Sustainable US Thematic Equity Strategy
AB Sustainable US
Thematic Equity Strategy
ES AllianceBernstein
Sustainable US Equity Fund
Base Currency USD GBP
Primary Investment Universe US Large-Cap Equity(aligned with the UNSDGs^)
US Large-Cap Equity(aligned with the UNSDGs^)
Benchmark S&P 500 Index S&P 500 Index
No. of Holdings 30 – 60 30 – 60
Assets Under Management $6.7bn* £8m
Inception December 1981 March 2020
Portfolio Managers Daniel Roarty
Ben Ruegsegger
Daniel Roarty
Ben Ruegsegger
ISINs –I Acc GBP: GB00BL4SFB26
I Inc GBP: GB00BL4SF903
Information as of 30 September 2020. *Strategy AUM as of 30 June 2020. ^United Nations Sustainable Development Goals.
Source: AB
15
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
Important Information
and Disclosures
16
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
A Word About RiskES AllianceBernstein Sustainable US Equity Fund
Investment in the Fund entails certain risks. The investment returns and principal value of the Fund will fluctuate so that an investor’s shares, when redeemed,
may be worth more or less than their original cost. Dividends are not paid for all share classes and are not guaranteed. The Fund is meant as a vehicle for
diversification and does not represent a complete investment program. Prospective investors should read the Prospectus carefully and discuss risks and the
Fund’s fees and charges with their financial advisor to determine if the investment is appropriate for them. The value of an investment can go up or down and past
performance is neither indicative of, nor a guarantee of, future results.
Equities Risk: The value of equity investments may fluctuate in response to the activities and results of individual companies or because of market and economic
conditions. These investments may decline over short or long periods.
Focused Fund Risk: Investing in a limited number of issuers, industries, sectors or countries may subject the Fund to greater volatility than one invested in a
larger or more diverse array of securities.
Smaller Capitalization Companies Risk: Investment in securities of companies with relatively small market capitalizations may be subject to more abrupt or
erratic market movements because the securities are typically traded in lower volume and are subject to greater business risk.
Derivatives Risk: The Fund may include financial derivative instruments. These may be used to obtain, increase or reduce exposure to underlying assets and
may create gearing; their use may result in greater fluctuations of the net asset value.
Other Risks Include: Fund turnover risk, emerging-markets risk and OTC derivatives counterparties risk.
These and other risks are described in the Fund’s prospectus.
The ES AllianceBernstein Sustainable US Equity Fund is a Sub Fund of ES AllianceBernstein UK OEIC, an open-ended investment company. Equity Trustees
Fund Services Ltd is the Authorised Corporate Director of the Fund.
AllianceBernstein Limited has been appointed as a distributor of the Fund.
Before investing, investors should review the respective fund’s full prospectus, together with the relevant Key Investor Information Document (KIID) and the latest
annual report and, if issued thereafter, the latest semi-annual report. Copies of these documents may be obtained free of charge from the ACD’s website
www.EquitiyTrustess.com or in printed form from Equity Trustees Fund Services.
17
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
Important InformationES AllianceBernstein Sustainable US Equity Fund
An investor cannot invest directly in an index or average, and these do not include the sales charges or operating expenses associated with an investment in a mutual fund, which
would reduce total returns.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be
further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.
Logos, brands and other trademarks in this presentation are the property of their respective trademark holders. They are used for illustrative purposes only, and are not intended to
convey any endorsement or sponsorship by, or association or affiliation with, the trademark holders.
This information is directed at investment professionals only and should not be relied upon by any other persons. It is provided for informational purposes only and is not intended
to be an offer or solicitation, or the basis for any contract to purchase or sell any security, product or other instrument, or to enter into any type of transaction as a consequence of
any information contained herein. The views and opinions expressed in this document are based on our internal forecasts and should not be relied upon as an indication of future
market performance.
References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by AB. The specific
securities identified and described in this presentation do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that
investments in the securities identified were or will be profitable.
Note to UK Readers: This information is issued by AllianceBernstein Limited, 50 Berkeley Street, London W1J 8HA. Registered in England, No. 2551144. AllianceBernstein
Limited is authorised and regulated in the UK by the Financial Conduct Authority (FCA).
18
For Investment Professional use only.
Not for inspection by, distribution or quotation to, the general public.
Performance DisclosureSustainable US Thematic Composite (in GBP)
The [A/B] logo is a registered service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
© 2020 AllianceBernstein L.P. www.AllianceBernstein.com
LF-144785-2020-10-09