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.

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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



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



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



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



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



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



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

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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

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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

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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

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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%

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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)

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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

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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

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Important Information

and Disclosures

16



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.

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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).

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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

sustainable investing for a changing environment · 2020. 10. 13. · daniel roarty –cio,...

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