AllianceBernstein has launched the AB Global ESG Improvers Portfolio.
The new fund is managed by Jeremy Taylor (pictured) and employs a ‘transition and engagement strategy’ to make the companies it invests in become more sustainable.
The approach is to buy discounted stocks that have high cashflow-based internal rates of return, that are either not recognised by the market for driving positive change, or that have strong ESG credentials. The strategy has been running as a segregated account for more than two years.
The portfolio invests in two areas the firm believes traditional ESG approaches have tended to bypass. ‘Neglected enablers’ are overlooked businesses supplying vital components that underpin wider ESG gains, while ‘unrecognised improvers’ are businesses where there ESG profile is underappreciated.
Having one of these two characteristics, combined with an attractive valuation is required for inclusion the fund.
The fund will be made up of 30-40 stocks which have the highest conviction and improving-ESG potential. It has been classed as an Article 8 fund and is domiciled in Luxembourg. It is registered in the UK, Switzerland, France, Germany, Italy, Netherlands, Switzerland, Belgium, Finland, Norway and Sweden.
Taylor commented: “We believe we can deliver notable investment returns by investing in underappreciated companies that are also driving material ESG improvement.
“Currently we find that sectors such as materials, utilities and industrials contain a significant number of stocks where market perceptions are yet to catch up with significant ESG improvements. Progress in these industries will be key to the world meeting substantial ESG challenges such as decarbonisation.”
“We don’t feel that this has yet been properly understood or valued by the market, but we aim to bring it to the forefront. Additionally, the approach means the fund generates exhibits value characteristics, a key differentiator to counterbalance the growth bias inherent in many responsible funds.”
AllianceBernstein has $676bn in assets under management.
This article first appeared on ESG Clarity’s sister title Portfolio Adviser.