The individuals we’ve interviewed come from a variety of backgrounds and their areas of expertise and responsibility are equally diverse. We’ve learned a lot from them in these conversations and are excited to follow their progress.
Q: Hello! Tell us a little about what you do at AllianceBernstein.
A: I’m a Portfolio Manager at AllianceBernstein and I manage portfolios with purpose in the fixed income space. Within all the portfolios every investment that I make has a sustainability rationale and objective.
Q: Why did you choose to work in this position and space?
A: I sort of fell into it by accident.
I was born and bred in Morocco. Coming from an emerging market, sustainability issues stare you in your face growing up, but I never really specialized in this field until I started working at Alliance Bernstein in 2015. At this time, one of our portfolios had an allocation to green bonds, so we were already looking at the asset class in detail, and we officially launched our sustainable global thematic credit fund in 2019.
I love this space. I feel I have found my calling.
Within the sustainability space, I have a special interest in climate-related issues.
I feel that it’s a space that is very mispriced in the market and this presents a good opportunity for us as investors. This is because neither society as a whole, nor most of the investor community, are aware enough of the many overarching aspects related to the climate crisis.
Firstly, while looking at the carbon risks in your portfolio is very important, in many cases, it is completely underappreciated. Many investors don’t know how to price the risk connected to climate and to a net zero transition for that specific asset.
Secondly, although investors are becoming increasingly sophisticated in understanding these effects, there are other areas where data availability is lagging, such as biodiversity and conservation, which are areas I’m very interested in.
Thirdly, there is an increased realization that climate risks are systemic. In the late 2000s, there was a drought in Russia and this resulted in a shortage of wheat being brought to the market. The cascading effect of this was the Arab Spring as the soaring bread prices led to protests. Big political events can in many cases be linked back to climate risks and we are just starting to size these risks as an investment community.
Other climate issues include those related to water and water scarcity. Being able to size these will be key to understanding climate risks holistically.
Q: What are some opportunities and challenges you face in your sustainability role?
A: An opportunity that presents itself with climate-focused investing is that by better measuring climate risks you become a better investor.
The challenge of that is that you need data that is reliable and that is scalable. You also need to be confident in the underlying science and the underlying data models which is a complex endeavor. The science is evolving all the time and you also need to keep abreast of everything happening in the market. The sensitivities of the investor community are changing all the time, so you need to be dynamic in understanding where the risks and opportunities are. This is something that is very difficult because you can’t just create a model and sit on it for a few years because the data evolves all the time. However, at the same time, if we are nimble and a little innovative in the way we approach these issues, we can find good investment opportunities.
For example, think of the voluntary carbon offsets market and how corporations use it. Buying an offset from a reputable program used to be sufficient to showcase commitments. Corporates are now facing much more scrutiny regarding the type of offsets they buy, their vintages, how those fit within an overall decarbonization commitment which should predominantly come from decarbonization of their operation. Today, we need more reliable, relevant and effective data to help identify which offsets have compelling sustainability credentials and how to measure biodiversity co-benefits from those offsets. This is a dynamic and evolving field and needs to be followed with interest.
Q: What skills do you think are particularly vital for you in your sustainability role?
A: I’m a fixed income investor so being good with numbers is important, but other than that, to thrive in this space one needs to be curious, nimble and pragmatic.
This is essential in order to adapt to the latest science, new regulations, initiatives and asset classes that come to the fore. For example, when we first started to look at green bonds, they were a tiny part of our market and now 30% of new issuance is green bonds in European Investment grade.
Q: What other teams do you work with closely or rely on to be successful at AllianceBernstein?
A: We work with a number of internal stakeholders at AllianceBernstein. These include other portfolio managers, traders, analysts and economists. We do this to make sure that we’ve built portfolios that can outperform their benchmarks and be good investment propositions. It is our strong belief that in order for sustainable finance to flourish it needs to constitute a compelling investment proposition.
Within AllianceBernstein we also have a broader responsible investment team, which is constituted of subject matter experts on various sustainability topics. We have to have regular interactions with them, as well as people who manage other asset classes, to understand how we should be thinking about investing sustainably and what new assessment tools we can use.
We also partner with NGOs and various other international bodies. We’ve been signatories of the United Nations Principles for Responsible Investment (UNPRI) since 2011, in 2015 we became supporters of the Carbon Bonds Initiative and in 2019 we entered a collaboration with Columbia University Earth Institute. Academics at Columbia University help us define our thinking about climate issues on various topics such as salmon fishing, physical risks and carbon offsets. We are collaborating with them on a lot of research related to climate considerations.
Externally, we work with syndicate desks at investment banks. They are the ones who bring bonds to us so we need to make sure that they understand what investor preferences are from a sustainability perspective.
Q: What are some trends you’re seeing in the sustainability space?
A: We have, as investors, become much better at sizing climate risks in our portfolios, particularly those related to carbon. Going forward we expect the focus to increase on natural capital. If you think about our planetary boundaries, we’re actually closer to our tipping point for biodiversity versus where we are for carbon.
In addition, the concept of just transition and social co-benefits to environmental issues is also coming to the fore. We need to make sure that as the world transitions to a low-carbon economy certain populations don’t get left behind. We also need to make sure that adaptation technologies are made available so that we have sustainable infrastructure and health systems in our societies to allow for social advancement.
Q: What do you think about the role of women+ in the sustainability sector and averting the climate crisis?
A: As global issues, gender inequality and the climate crisis should not be treated as separate. For example, in Bangladesh, during the monsoon season, the mortality rate among women is much higher than it is for men. I think that the reason for this is that men have education and information. Women don’t. So in order to advance these issues, we must acknowledge that they are all linked. Climate poverty is linked to gender poverty.
When it comes to sustainable finance as a career, historically women have taken a lead in sustainability. I think this is because, especially in finance, women have had few leadership opportunities. This means that when, years ago, no one was thinking about sustainability, this gave women an opportunity because they didn’t have much competition. Now, however, it’s coming to the fore and we’re getting a lot more balanced interest in the field. I think it’s a good thing and defining it along gender lines is probably the wrong way to do it because these issues touch both women and men. I know a lot of women who are very passionate about the climate crisis and equally a lot of men as well.