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AB Managed Volatility Equities—Green (Green MVE)

Seeking Positive Outcomes Through Green Alpha

 

Green MVE aims to have a positive effect on the environment by targeting a carbon-neutral portfolio, whilst also seeking to deliver attractive returns for equity investors.

 

Investment Approach

Low-Volatility Stocks

The portfolio is anchored in low-volatility equities, as they represent typically low–carbon emitters. * Their potential to reduce downside portfolio risk may help deliver attractive investment returns over time.

High Volatility Sectors are Typically Carbon Intensive
Analysis of S&P/ASX 200

As of June 30, 2021
Past performance does not guarantee future results.
*Since its inception in 2014, through March 31, 2018, the AB Managed Volatility Equities investment strategy, on which Green MVE is based, has had, on average, 25% of the carbon emissions of its benchmark, the S&P/ASX 200 Index.
†Scope 1 emissions are from owned or controlled sources. Scope 2 emissions are from the generation of energy.
Source: Bloomberg, BP Statistical Review, Energy Information Administration (EIA), FactSet, MSCI, S&P Dow Jones, Worldscope, company reports and AB

Assigning a Cost to Carbon

There is a growing belief that putting a cost on carbon is an efficient way to attain greener outcomes by encouraging reductions in carbon emissions.

Green Alpha

Redefining success as the performance of a carbon–neutral portfolio.

Illustrative Example

As of June 30, 2021
Green alpha calculation for illustrative purposes only. Portfolio, index, alpha and green alpha numbers are not real.
For this illustrative example, the portfolio's carbon emission is the same as that of the S&P/ASX 200 Index.
*Assumes CO2 emissions for Scope 1 + Scope 2 + fossil fuels produced but not consumed ("carbon emission") are offset at A$22/t. Carbon emission is determined by referencing MSCI ESG data for each investment in the portfolio, where available (where the specific information is not available, industry averages have been used). Green alpha represents the relative performance of the portfolio after adjusting the relative performance of the cost of offsetting the carbon emission attributable to each investment in the portfolio. No further adjustment has been made for any duplication of carbon emission where the same emission is made by one investment entity and used by another investment entity in the portfolio.
Source: Bloomberg, BP Statistical Review, EIA, FactSet, MSCI, S&P Dow Jones, Worldscope, company reports and AB

Corporate Engagement

We engage with companies to understand how carbon emissions impact their cost of capital and incentivise them to reduce their footprint. 

For illustrative purposes only. Amount of focused engagements may vary and may change without notice.
*Based on the S&P/ASX 300 Index.
Source: AB

Offsetting Emissions

We engage third parties to facilitate the retirement of carbon credits.

Carbon credits are an important step in the process of offsetting carbon emissions, and typically represent investments made in projects designed to mitigate or repair environmental damage caused by carbon emissions. Some carbon credits are created and certified by applicable regulators and/or accreditation bodies and can be made available to companies or other entities that wish, or are required, to use the carbon credits against their own carbon emissions. In such instances, the carbon credits are retired by the registry organisation so they can’t be used again.

The Babinda Reef Project is a carbon offset initiative managed by Qantas Future Planet.

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Why Invest?

Toward a Carbon-Neutral Portfolio

Since its inception in 2014, the AB Managed Volatility Equities investment strategy, on which Green MVE is based, has had, on average, 25% of the emissions of the index associated with the portfolio’s holdings.*

Combining a naturally low carbon footprint with a commitment to further reduce the emissions of its portfolio holdings through engagement, Green MVE has the potential to be a carbon-neutral portfolio.
*Average carbon gas emissions for AB Managed Volatility Equities relative to S&P/ASX 200, as of March 31, 2018

Downside Protection

Green MVE’s downside protection objective makes it possible to seek equity market–like returns with less risk, by forgoing some upside when markets rise, and reducing the downside when markets fall.

Changing Corporate Behaviour

By assigning an explicit cost to carbon and engaging with companies on the cost of their carbon emissions, we can send a message to corporations on climate risk and potentially encourage them to adopt more climate-friendly behaviour.

 

Investment Objective

 

Green MVE aims to achieve returns that exceed the S&P/ASX 300 Accumulation Index after fees over the medium to long term, and to reduce the carbon emissions associated with its portfolio holdings.

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What Do We Mean by “Green”?

In an investment context, the word “green” is often loosely used to denote any strategy that is intended to be environmentally friendly or aligned with environmental, social and governance (ESG) objectives. In the case of Green MVE, the word “green” refers to a specific and highly differentiated investment approach developed by AllianceBernstein in seeking to deliver positive outcomes for the environment and equity investors.

This approach can be summarised as: combining an active investment strategy investing in low volatility equities, valued after a price on carbon, with a focus on encouraging a reduction in carbon emissions.
There is no universal definition of what constitutes a “green” outcome. Please refer to AB’s Approach to Carbon Neutral.

Brad Karp

Managing Director
Australia Client Group
(03) 8630 2232
Brad.Karp@AllianceBernstein.com

Jeremy Browne

Managing Director
Australia Client Group
(02) 9255 1230
Jeremy.Browne@AllianceBernstein.com

Christina Manonian

Managing Director
Asia Pacific Consultant Relations
(03) 8630 2227
Christina.Manonian@AllianceBernstein.com

This document has been prepared by AllianceBernstein Australia Limited (“ABAL”)—ABN 53 095 022 718, AFSL 230 698. Information in this document is only intended for persons that qualify as “wholesale clients,” as defined by the Corporations Act 2001, and is not to be construed as advice. This document is provided solely for informational purposes and is not an offer to buy or sell securities or to provide any service. The information, forecasts and opinions set forth in this document or provided at any meeting have not been prepared for any recipient’s specific investment objectives, financial situation or particular needs. Neither this document nor the information contained in it are intended to take the place of professional advice. You should not take action on specific issues based on the information contained in this document without first obtaining professional advice.

Past performance and historical analysis do not guarantee future results. Projections, although based on current information, may not be realized. Information, forecasts and opinions can change without notice and ABAL does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained in this document or provided at any meeting, ABAL does not warrant that this document or any information or opinion provided at a meeting are free from errors, inaccuracies or omissions. ABAL disclaims any liability for damage or loss arising from reliance upon any matter contained in this document or provided at any meeting except for statutory liability which cannot be excluded.

No reproduction of the materials in this document may be made without the express written permission of ABAL. This information is provided for persons in Australia only and is not being provided for the use of any person who is in any other country.

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© 2019 AllianceBernstein L.P.

This information is for exclusive use of the wholesale person to whom it is provided and is not to be relied upon by any other person. It is not intended for retail or public use and may not be further distributed without prior written consent of ABAL.
This webpage has been prepared by AllianceBernstein Australia Limited (“ABAL”)—ABN 53 095 022 718, AFSL 230 698. Information in this webpage is only intended for persons that qualify as “wholesale clients,” as defined by the Corporations Act 2001, and is not to be construed as advice. This webpage is provided solely for informational purposes and is not an offer to buy or sell securities. The information, forecasts and opinions set forth in this webpage have not been prepared for any recipient’s specific investment objectives, financial situation or particular needs. Neither this webpage nor the information contained in it are intended to take the place of professional advice.
You should not take action on specific issues based on the information contained in this webpage without first obtaining professional advice. Past performance does not guarantee future results. Projections, although based on current information, may not be realized. Information, forecasts and opinions can change without notice and ABAL does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained in this webpage, ABAL does not warrant that this webpage is free from errors, inaccuracies or omissions. ABAL disclaims any liability for damage or loss arising from reliance upon any matter contained in this webpage except for statutory liability which cannot be excluded.
No reproduction of the materials on this webpage may be made without the express written permission of ABAL. This information is provided for persons in Australia only and is not being provided for the use of any person who is in any other country.

© AllianceBernstein L.P.