Our Approach to Carbon Neutral

The AllianceBernstein approach to creating and managing a net carbon neutral (“Carbon Neutral”) investment strategy is intended to align with the general principles outlined by the predominant international and domestic authorities seeking to address climate change. This includes the United Nations Framework Convention on Climate Change (UNFCCC), the World Bank, the Australian Clean Energy Regulator, and the New Zealand Ministry for the Environment.

Specifically, we are committed to the following 3 step approach with respect to the MVE-Green Class (“MVE-Green”):

  1. Calculating the greenhouse gas (“GHG”) emissions from the activities of the portfolio companies.
  2. Seeking to reduce the GHG emissions associated with MVE Green’s portfolio holdings in portfolio construction.
  3. Offsetting the remaining net GHG emissions associated with MVE-Green’s portfolio holdings.1

The following provides the specifics of our approach.

Calculate GHG Emissions

  • GHG emissions will be calculated as the pro-rata share of the underlying portfolio companies’ emissions based on the percentage ownership of the company held in MVE-Green. For example, if MVE-Green owns 1% of a company with 1 million tonnes of emissions, MVE-Green’s share will be 10,000 tonnes (1% x 1 million.)
  • MVE-Green will rely on 3rd party GHG emissions data, initially from MSCI, to calculate Scope 1 and Scope 2 emissions. In addition, Scope 3 emissions created by the extraction and sale of fossil fuels (coal, oil, gas, and LPGs) will be included in the companies’ emissions estimates. These emissions will be estimated based on company reports and will rely on intensity factors published by the National Greenhouse Account Factors, published by the Australian Department of Environment and Energy. The estimate will also rely on the BP Statistical Review of Energy for conversion factors.
  • In cases of data that we deem to be inaccurate or unavailable we will estimate emissions using publicly available data.
  • MVE-Green will seek to include all global GHG emissions, based on the calculation method outlined above, of companies in the MVE-Green portfolio.

Reduce GHG Emission

  • MVE-Green will seek to reduce the emissions associated with portfolio holdings in the first instance by including an estimated cost of GHG emissions of companies in its investment universe when forming its investment decisions. The intended result is a portfolio with emissions materially below those of an investment in an index.
  • In addition, we will engage with issuers on ESG factors, including GHG emissions. This engagement will encourage the reduction of emissions in the operations of the portfolio companies.
  • We will report periodically on the emissions of the portfolio companies and monitor the progress of emissions reduction.

Offset Emissions

  • MVE-Green will seek carbon neutrality by offsetting the remaining GHG emissions associated with the portfolio holdings (generally) quarterly in arrears.
  • In practice, offsetting activities will involve the engagement of third parties to facilitate the cancellation or retirement of carbon credits, who will provide evidence of the cancellation.
  • It is intended that offsetting activities will use units/credits that are recognised by a credible and high quality third party. In the first instance this could include the Australian Clean Energy Regulator, the New Zealand Ministry for the Environment, or the UNFCCC. We note that the Clean Energy Regulator, through the National Carbon Offset Standard, Appendix A, has identified a subset of offset units for eligibility for that standard.
  • We will consider the country of origin of both the emissions and the offsets in the offsetting strategy.
  • It is the intention to offset emissions of the MVE-Green portfolio via a third party where such offsetting continues to be consistent with MVE-Green’s investment objective through the cancellation of credits or units that have a price which is sufficient to send a material economic signal to market participants.

Appendix A: Eligible Offset Units2

Eligible offset units

As of 1 November 2018, all units must have a vintage year later than 2012.

The following offset units are eligible under the National Carbon Offset Standard:

  • Australian Carbon Credit Units (ACCUs) issued by the Clean Energy Regulator in accordance with the framework established by the Carbon Credits (Carbon Farming Initiative) Act 2011.
  • Certified Emissions Reductions (CERs) issued as per the rules of the Kyoto Protocol from Clean Development Mechanism projects, with the exception of:

    • long-term (lCERs) and temporary (tCERs); and
    • CERs from nuclear projects, the destruction of trifluoromethane, the destruction of nitrous oxide from adipic acid plants or from large-scale hydro-electric projects not consistent with criteria adopted by the EU (based on the World Commission on Dams guidelines).
  • Removal Units (RMUs) issued by a Kyoto Protocol country on the basis of land use, land-use change and forestry activities under Article 3.3 or Article 3.4 of the Kyoto Protocol.
  • Verified Emissions Reductions (VERs) issued by the Gold Standard.

    • Abatement recognised by the Gold Standard may be subject to the possibility of double counting; for example, where the abatement occurs in a host country or region that is affected by international or national emissions trading, cap and trade or carbon tax mechanisms. Please see the Gold Standard’s Double Counting Guideline for full details.
    • Where the additionality of a VER is ensured through the cancellation of an Eligible Cancellation Unit (as defined by the Gold Standard), that VER is only eligible for use under the National Carbon Offset Standard where the applicable Eligible Cancellation Unit would also have been eligible under the National Carbon Offset Standard.
  • Verified Carbon Units (VCUs) issued by the Verified Carbon Standard.

This list of eligible offset units will be updated as new information or new offset units become available. This may result in the addition of new offset units or the removal of existing ones.

A decision framework based on the offset integrity principles (Section 1.3.1) is used to determine the eligibility of new offset units and to review the eligibility of existing units.
1. There is no guarantee investment activities will always be offset or reduced. The goal of carbon neutrality will be targeted for the duration of the Class and only to the extent consistent with the relevant investment objectives. The goal relates to the equities forming part of the portfolio considered as a whole and not in relation to a particular equity forming part of the portfolio or any stock which no longer forms part of the portfolio holdings.

2. Source: National Carbon Offset Standard

As of 12/03/2019