AB Sustainable Global Thematic Fund

overall rating:

0.9

planets

Alex Powell
3/8/2022
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This fund aims to ensure long-term growth, as do most, but also claims to have a focus on keeping ‘broadly consistent’ with the UN’s Sustainable Development Goals. However, it falls short in a number of ways, with too much focus on financial institutions in its holdings, and a methodology that is far too vague and lacks the necessary strictures as to enforce a sustainable practice. The transparency however is far more positive, with a full list of holdings available for research purposes, and full disclosure as to the manager of the fund and their background. AllianceBernstein is also a relatively strong firm in their environmental practices, with a proven track record of reducing emissions and a management team that is slowly becoming more and more diverse, with good environmental leadership. Overall, while this fund is not excellent, it is certainly not egregiously bad. 

What it's made of:

0.9

The top 10 holdings are below - Name, percentage, ESG :

1) SVB Financial, 2.79%, 29.1, 2) Lumentum Holdings, 2.76%, 18.2, 3) Erste Group Bank, 2.74%, 15.7, 4) Waste Management Inc., 2.60%, 14.5, 5) Laboratory Corp. of America, 2.46%, 19.7, 6) Danaher, 2.43%, 17.7, 7) Becton Dickinson & Co, 2.41%, 26.5, 8) Deere & Co, 2.40%, 17.2, 9) MSCI, 2.38%, 12.2, 10) Apple, 2.30%, 16.3

The fund traditionally holds between 30 and 60 stocks, although there are a number of issues with this ten stock cross-section of the fund. Firstly, the top holding is SVB Financial, a company with a poor track record in sustainability, and one that almost ranks in the ‘high risk’ category for ESG score. For this to be the firm receiving the greatest investment from a ‘sustainable fund’ (albeit only by 0.03%), the selection process must leave much to be desired. This is further compounded by the fact that out of the top ten holdings, four are financial institutions. Financial institutions, whilst not often the producers of emissions, facilitate the growth of firms that ensure our planet does not receive its due stewardship - I would firmly encourage investment in financial providers on the principle that they use the money to invest in further green projects, but I sincerely doubt such an arrangement exists / is possible. In my opinion, investment in these such firms is more often than not a way of avoiding investing in truly green projects, all under the false pretence of sustainability. However, we should commend AllianceBernstein for their transparency in this regard - they publish their full portfolio holdings with approximately a two month time lag, still good enough to allow the potential consumer to discover the true nature of the fund, something often hidden by other institutions. 

How it's made:

0.5

The key listed ‘objective’ of the fund is “long-term growth of capital,” hardly confidence inspiring for a supposedly sustainable fund. Nevertheless, AllianceBernstein does disclose further information as to why it may justify the title it gives this fund. On a positive note, it references the investment in emerging markets, and in companies of all sizes. This democratisation of investment allows for smaller companies who may yet still have fantastic ideas to get off the ground and transition into larger firms - especially when considering environmental sustainability, the need for innovation is rife. However, of some concern is the line that precedes this, as the fund “identifies sustainable investment themes that are broadly consistent with achieving the UN Sustainable Development Goals.” The phrase ‘broadly consistent’, in my opinion, gives the specific fund manager far too much leeway to ignore fundamental principles in environmental stewardship. We, at this point in our planet’s evolution, should be absolutely following the SDGs, as not only are they the bare minimum we need to follow to save our planet, but they are also a collaborative effort from the largest international organisation in this sphere. Ultimately, environmental change is about cooperation, and by dismissing these goals as guidelines rather than absolutes, AllianceBernstein is not doing as much as it could. 

Who makes it:

1.5

AllianceBernstein is very transparent about the manager of the fund, with Daniel C. Roarty named as the figure in charge. His experience is clearly outlined, and it is refreshing to see that he spoke at the 2018 UN Sustainable Investing Conference, which at the very least shows AllianceBernstein to be actively getting involved in the discussion around sustainability, even if it could also be explained by a wish for a better corporate public image. However, Roarty came to sustainable investment management from the world of finance, with career experience at Morgan Stanley and Goldman Sachs, where he had no such responsibility for our world’s future. It would have been nice to see a fund manager who was brought in for primarily their sustainable expertise, rather than their financial acumen, but I can acknowledge that we may be half a decade away from there being sufficiently many individuals trained in environmental sustainability that these roles can reasonably be expected to be filled as such. As a wider firm, AllianceBernstein has an ESG score of 20.8, sufficient to be classified as ‘Medium Risk’ (albeit on the lower end), not particularly impressive for a financial services provider, but equally with a ‘strong’ rating for management practices, one hopes this can come down in the near future. Indeed, AllianceBernstein can point to real successes in reducing their carbon footprint, with BREEAM awarding their newly renovated London office ‘Outstanding’ for being in the top 1% of refurbishments for the environment. This certainly adds legitimacy to some otherwise vague claims about the environment on their website. The Board of Directors itself however is not particularly diverse, with only a quarter of its membership from ethnic minority backgrounds, and particularly worryingly only three women sit on the board of 12. If this turns around in the upcoming years, I would begin to consider AllianceBernstein as doing a strong job, right now, they seem only adequate. 

Sources:

https://www.alliancebernstein.com/corporate/en/home.html

https://www.sustainalytics.com

https://www.ft.com

https://www.morningstar.co.uk/uk/