AllianceBernstein aims to take low-carbon investing to next level with lower emissions and higher investment returns
AllianceBernstein media release
April 11, 2019
Global asset manager AllianceBernstein has launched an Australian equities strategy which aims to set a new standard in low-carbon investing, offering a portfolio which is both potentially carbon-neutral and capable of generating attractive returns.
The strategy, AB Managed Volatility Equities - Green (“Green MVE”), is based on the highly successful AB Managed Volatility Equities Fund, and brings a greater focus to exploiting the typically low-carbon characteristics of many low-volatility stocks.
It has attracted the support of key investors the Myer Foundation ― which became a seed investor in December 2018―and the Australian Government’s Clean Energy Finance Corporation (CEFC), which has provided a cornerstone investment commitment of up to $50 million.
Green MVE seeks to take advantage of the fact that a well-constructed portfolio of low-volatility stocks may not only provide smoother performance than the market during periods of volatility, but may outperform the market over longer periods of time.
“It’s a strategy that combines significant innovations in terms of low-carbon investing with a tried and tested underlying low-volatility investment approach which has been very successful since inception,” said Roy Maslen, AllianceBernstein’s Chief Investment Officer ― Australian Equities.
The innovations aim at carbon neutrality by constructing a portfolio with emissions 90% lower than the index and an arrangement to offset the remaining emissions through the retirement of carbon credits.
“We’re offering these environmental objectives together with the investment characteristics of the AB Managed Volatility Equities Fund, which we launched in Australia in April 2014,” said Maslen. “Since then, the Fund has outperformed the index by 4.1% a year.”*
Investors seeking a lower carbon footprint for their portfolios often believe that they can do so only by forgoing significant investment performance, said Maslen.
“Green MVE challenges that ‘either/or’ paradigm and aims to give investors superior performance in terms of both environmental outcomes and investment returns.”
It starts by anchoring the portfolio in low-volatility equities (which are typically low-carbon) and then applying a ‘price on carbon’ during the stock selection process.
“We believe this might be the first time that a ‘price on carbon’ has been applied to an actively managed investment portfolio in this way,” said Maslen.
Another innovation, which could potentially make the portfolio carbon-neutral, involves offsetting the greenhouse gas emissions associated with the holdings in the portfolio. This is done under third-party agreements for the retirement of carbon credits.
Applying a price on carbon helps to reduce the carbon emissions associated with portfolio holdings at the stock-selection stage and, by quantifying the amount of emissions within the portfolio, it also helps in the efficient retirement of carbon credits.
“We think investors will appreciate not only the potential for positive environmental and investment outcomes, but also the transparent and quantifiable way in which those outcomes are achieved,” said Maslen.
“These attributes, in our view, make Green MVE an attractive and ground-breaking addition to the universe of available low-carbon investment strategies.”
“We are pleased to have provided seed capital for this strategy which, in our view, opens up new possibilities in sustainable equities investing,” said Martyn Myer, President of the Myer Foundation.
“The aim and philosophy of the strategy is consistent with our foundation’s ethos of investing over the long term in a way that produces broad environmental and social benefits.”
CEFC CEO Ian Learmonth said: “Together with AllianceBernstein, we welcome this opportunity to work with leading Australian listed companies as they accelerate their transition to lower carbon emissions.
“As our first investment in listed equities, our participation in the Green MVE portfolio allows us to further extend our emissions focus across diverse businesses and through different financial structures.
“Importantly, it also unlocks new low carbon investment opportunities for investors focused on building increasingly sustainable investment portfolios. This is an emerging priority for institutional investors such as superannuation funds, family offices and insurers. We see a strong opportunity through the Green MVE portfolio to connect this investor interest with listed entities which are increasingly focusing on lowering their carbon emissions.”
* NOTE: The returns shown here are net of fees and costs and do not allow for tax or inflation. The return includes an adjustment for franking credits. The benchmark was changed to the S&P/ASX 300 Franking Credit Adjusted Daily Total Return Index (Tax-Exempt) effective March 1, 2016. The Fund’s previous benchmark, the FTSE ASFA Australia 300 Index–Tax Exempt, is used for the period March 31, 2014 (the Fund’s inception date) to February 29, 2016.
AllianceBernstein (AB) is a leading global investment management and research firm. We bring together a wide range of insights, expertise and innovations to advance the interests of our institutional investors, individuals and private clients in major world markets.
AB offers a comprehensive range of research, portfolio management, wealth management and client-service offices around the world, reflecting our global capabilities and the needs of our clients. As at February 28, 2019, our firm managed US$547 billion in assets, including US$253 billion on behalf of institutions. These include pension plans, superannuation schemes, charities, insurance companies, central banks, and governments in more than 45 countries.
This document is released by AllianceBernstein Australia Limited (“ABAL”) ABN 53 095 022 718, AFSL 230 698. AllianceBernstein Australia Limited (ABAL) is a wholly owned subsidiary of the AllianceBernstein, L.P. Group (AB).
Media release, 2019