Why Investment Teams Need to Lead the ESG Integration Process

11 January 2022
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Why Investment Teams Need to Lead the ESG Integration Process
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      Scott DiMaggio, CFA| Head—Fixed Income
      Chris Hogbin| Global Head—Investments
      Transcript

      Chris Hogbin: At AB, we believe that integrating environmental, social and governance considerations in the investment process improves risk-adjusted returns and investor outcomes. In order to truly understand ESG issues, our analysts must conduct in-depth, hands-on research and engage actively with issuers—not outsource ESG assessments to third-party providers.

      Michelle Dunstan:
      ESG integration and active engagement are fundamental to what we do, and the foundation of our responsible investment philosophy.

      ESG Integration and Engagement
      ESG Integration and Engagement

      As of 30 June 2021
      Source: AllianceBernstein (AB)

      ESG factors are incorporated into the research process for all actively managed strategies at AB. And it’s not enough to just choose the right securities: our fiduciary duty, as responsible stewards of clients’ capital, is to encourage companies to improve their business activities and practices. That requires active, direct engagement.

      Scott DiMaggio: Every portfolio manager and analyst, is committed to better understanding ESG issues.

      What are ESG Factors?
      What are ESG Factors?

          

      Environmental issues that matter include carbon emission, resource efficiency, waste management, pollution control, deforestation and biodiversity. We also consider social factors like modern slavery in supply chains, workplace safety, employee relations, and diversity and inclusion. Governance practices matter, too: all of our teams evaluate issues around bribery & corruption, executive pay, board structure and diversity, tax strategies, and internal controls and risk management. We want to see issuers aligned with stakeholders on E, S and G, and the people who are best-equipped to evaluate issuers’ ESG behaviors and practices are AB’s investment teams.

      Chris Hogbin: Our investment teams don’t tackle ESG alone. They work closely with our Responsibility team. These experts provide leadership in creating ESG frameworks and defining methodologies. They partner with our analysts in the research process. And they help conduct engagements with companies. The investment industry should be well past the point where ESG issues are considered separately from “traditional” return considerations. These issues need to be considered together and on a forward-looking basis. That’s what makes our investment teams’ partnerships with the Responsibility team so complementary—and so important.

      Michelle Dunstan: We have developed proprietary tools, including ESIGHT, our ESG research and engagement platform. These tools are critical to scaling our ESG insights across the firm. AB runs many portfolios across many investment teams, so sharing our proprietary ESG research and details of individual team engagements with issuers is critical. By staying connected, we can create strong research synergies and speak to issuers with a unified, impactful voice. With ESIGHT as the hub for all of our ESG research and engagement insights, we’re able to incorporate our best thinking into investment decisions.

      Scott DiMaggio: The process of integrating ESG across all actively managed strategies is governed by AB’s senior leadership and driven by the firm’s investment teams, in collaboration with our Responsibility team. ESG integration is supported by a robust infrastructure that includes proprietary tools, training and strategic partnerships. To learn more about the many ESG tools and processes we deploy at AB, please continue watching the next videos in this series.

      Responsibility Is Embedded at All Levels of the Firm
      Responsibility Is Embedded at All Levels of the Firm

         


      About the Authors

      Scott DiMaggio is a Senior Vice President, Head of Fixed Income and a member of the Operating Committee. As Head of Fixed Income, he is responsible for the management and strategic growth of AB’s fixed-income business and investment decisions across the department. DiMaggio has previously served as director of Global Fixed Income and continues to be a portfolio manager across numerous multi-sector and multi-currency strategies. Prior to joining AB’s Fixed Income portfolio-management team, he performed quantitative investment analysis, including asset-liability, asset-allocation, return attribution and risk analysis for the firm. Before joining the firm in 1999, DiMaggio was a risk management market analyst at Santander Investment Securities. He also held positions as a senior consultant at Ernst & Young and Andersen Consulting. DiMaggio holds a BS in business administration from the State University of New York, Albany, and an MS in finance from Baruch College. He is a member of the Global Association of Risk Professionals and a CFA charterholder. Location: New York

      Chris Hogbin is the Global Head of Investments for AB. In this broad leadership role, he oversees all the firm’s investment activities. Hogbin is responsible for driving investment success across asset classes, fostering collaboration and sharing best practices across investment teams, as well as leveraging a common infrastructure and evaluating opportunities to invest in capabilities that deliver better outcomes for clients. He is also a member of the firm’s Leadership team and Operating Committee. Hogbin joined AB’s institutional research business in 2005 as a senior analyst covering the European food retail sector. In 2010, he was named to Institutional Investor’s All-Europe Research Team and was ranked as the #1 analyst in his sector in both 2011 and 2012. Hogbin became European director of research for the Sell Side in 2012 and was given additional responsibility for Asian research in 2016. In 2018, he was appointed COO of Equities for AB. In 2019 Hogbin was promoted to co-head of Equities, becoming head of Equities in 2020. Prior to joining the firm, he worked as a strategy consultant for the Boston Consulting Group in London, San Francisco and Shanghai, where he was responsible for the execution of critical business-improvement initiatives for clients in the financial-services and consumer sectors. He holds an MA in economics from the University of Cambridge and an MBA with distinction from Harvard Business School. He is a trustee of the Public Theater in New York.