ESG Integration and Engagement

 

The Active Engagement Advantage

We’re active investors, and engagement is vital to our process. Each year, AB analysts engage with leaders of companies and noncorporate entities, including municipalities, supranational and sovereign issuers. And we engage selectively through our proxy voting activities.

These connections allow us to assess, discuss and encourage better business practices and approaches for addressing rapidly evolving ESG issues. We believe firmly that engagement drives better research and better outcomes for our clients.

 

Integration in Action

ESG Integration is about thoughtfully considering how material ESG issues impact a company’s investment attractiveness.

Illustration of Active Engagement Advantage
 

How Does Engagement Make a Difference?

  • Independent Perspectives: With direct access to management, our active equity and fixed-income analysts and responsible investment team seek to develop unbiased perspectives on ESG issues through dialogue with companies. Different teams can engage separately or jointly when appropriate.
  • Proprietary Tools: Using our in-house research and collaboration tools, AB analysts can share insights in real time and track any needed follow-ups for extended engagements.
  • Constructivist Approach: As large stewards of capital, we can facilitate constructive engagement with management teams and, where appropriate, directors, to create a forum to discuss many industry-related topics, including ESG issues.
 
Solar panels on hillside
ENGAGEMENT DATA

Engagement Campaign Report

In 2020, AB conducted its first, targeted ESG Engagement Campaign focused on ESG metrics in executive compensation and climate-risk goals and disclosures. AB portfolio managers and analysts engaged with over 350 of our largest holdings for action, asking companies to improve current practices or adopt new ones.

 
INTEGRATION AND ENGAGEMENT IN PRACTICE

Reducing Modern Slavery Risks

Modern slavery is a complex issue, and tackling it requires a constantly evolving process. At AB, we’re committed to reducing modern slavery risks associated with the operations and supply chains of companies we invest in. We’re expanding our training program to include more staff members and enhancing the monitoring of our suppliers’ compliance with AB policies on modern slavery.

Young girl of Asian decent peering out from behind iron bars
 

Engaging with Issuers on COVID-19

Engagement has always been a vital part of our investment process, as we work to better understand issuers’ ESG behaviors and, increasingly, to advocate for change. In 2020, we logged over 12,500 meetings, including issuer-specific engagements and strategic thematic engagements.

In 2020, COVID-19 affected societies, economies and industries, so engaging on pandemic-related issues is central to dialogues with management teams—along with traditional topics such as compensation and carbon emissions. We want to ensure that issuers are being responsible corporate citizens and to better understand opportunities and threats.

Chart shows what AB is engaging issuers on: Fundamental (Impact on demand, operations, cash flow; balance sheet, strength and debt profile) 80%;  Social (Employee support, including work from home, furlough/severance and flexibility) 54%; Governance (executive conduct and compensation adjustments; dividends/buybacks) 20%; Environmental (Capex plans on technology to reduce emissions or mitigate climate impact) 2%.
 

AB ESG in Action

ESG in Action
ESG in Action: Stakeholder Focus Expands Proxy Voting Agendas
Stakeholder Focus Expands Proxy Voting Agendas
28 March 2021 / 8 min read
by Diana Lee, Michelle Dunstan As the proxy season opens, the scope of shareholder activism is broadening. More companies are being asked to redefine themselves to benefit all stakeholders. Investor efforts to enhance shareholder value via proxy votes will need to be adjusted for this changing environment.
Investment Insights
A cluster of ripe oranges hang from a tree in a sun-filled orchard
How Shopping—and Investing—Might Be Enabling Modern Slavery
25 January 2021 / 4 min read
by Saskia Chick, Michelle Dunstan It may seem shocking, but a simple trip to the local store to pick up fresh produce or clothing could enable human exploitation. For investors, those same connections can exist within their portfolios-and it takes more than a passive effort to root them out.
ESG in Action
A group of walruses lay on a floating iceberg in a turquoise Arctic sea.
Improving Climate Change Models for Investments
21 January 2021 / 5 min read
by Sara Rosner Gauging the potential impacts of climate change on a company’s valuation or portfolio performance is extremely difficult. At AB, we’ve partnered with Columbia University’s Earth Institute to conduct an extensive review of existing climate change scenario-analysis providers and their various approaches.