Sustainable Investment Awards 2022

ESG assessment tool of the year, risk and reporting; TCFD report of the year; Environmental fund of the year, global: AllianceBernstein

AllianceBernstein (AB) has developed a tool to help investors assess the risk of modern slavery in their portfolio holdings and identifying targets for active engagement.

Having developed the tool, the firm has identified five criteria for assessing best practices. These are: governance framework; risk identification; action plan to reduce risks; action plan effectiveness; and future improvement. 

The tool uses a 3x3 matrix to assess which companies are at high risk of having modern slavery in their supply chains, as well as in their own operations. It gives each company or issuer a score out of six, with those scoring one facing the lowest risk. A potential three points are assigned for the operations risk the company faces and another potential three points for the risk identified in their supply chain.

Once the level of risk is identified, AB engages with companies and issuers on the best practices, identified above, to reduce modern slavery risk.

So far, AB has conducted 110 engagements on modern slavery with 82 companies. As an active manager AB believes investors have the ear of company management and can use their capital to push companies to make advances on modern slavery, it says.

“Modern slavery is a pervasive social issue that we believe active investors are in a unique position to address,” said Saskia Kort-Chick, director of social research and engagement at AB. “That’s why we developed our proprietary modern slavery risk assessment matrix and best practices framework.”

One EF Awardsjudge commented that it was an “impressive tool to address an issue not yet as well-known as it should be”.

Meanwhile, outlining its first 2025 Climate Action Plan, AB’s Climate Change Statement & Task Force on Climate-related Financial Disclosures (TCFD) Report won the TCFD Report of the year award.

The statement lays out AB’s climate strategy, building on its first TCFD report from the previous year, and describes its governance and risk management approach to climate change and how it aligns with TCFD recommendations.

The climate strategy is based on four pillars:

  • Partnerships for collective actions, highlighting the importance of memberships.
  • Integration of climate change risks, impacts and opportunities when constructing portfolios,
  • Stewardship to engage for insight and action and encourage companies to take their own climate action, and
  •  Portfolios with purpose, designed to achieve specific environmental, social and governance (ESG) and climate-related goals.

“AB supports the Paris Agreement and is committed to playing our role in reducing greenhouse gas emissions to limit global warming to below 1.5°C,” said Michelle Dunstan, chief responsibility officer at AB. “Considering climate risk in our investments and own operations, as well as educating others on this threat, is essential to combating climate change. Following reporting best practices can help in this endeavour, as demonstrated by our Climate Change Statement and TCFD Report.”

AB’s partnership with climate and legal experts at the Columbia Climate School, with the aim of ensuring the team understands the issue of climate change from every angle, was a striking feature of the year. The firm’s equity, fixed-income and multi-asset professionals as well as board members and the CEO completed the initial 'climate science and portfolio risk’ training AB developed with the university.

Finally, a successful year saw AB’s Sustainable Climate Solutions Portfolio win Environmental fund of the year, global for focusing on eight climate solutions categories derived from the UN Sustainable Development Goals (SDGs) and allocating to companies that provide products and services that contribute to these solutions.

The categories are: Agriculture, Clean Energy, Food Waste, Infrastructure, Recycling, Resource Efficiency, Transportation, and Water. AB, as well as assuring a portfolio company targets one of these eight areas, also undertakes bottom-up fundamental research, incorporating material ESG risks for individual companies to be assessed and quantified. AB says it feels this enables it to find opportunities missed by broader markets.

“The AB Sustainable Climate Solutions Portfolio invests in companies whose products or services provide solutions to the world’s greatest climate risks,” said David Wheeler, portfolio manager of AB Sustainable Climate Solutions. “We use carbon handprints, or the way products or services directly reduce carbon emissions, to find companies that are providing powerful solutions to climate challenges.”