By Emry McKinney | illumination Contributor

If bats make you think of Halloween and spooky movies, Brett Hartis, lead scientist in Duke Energy’s Environmental Sciences group, would like to change your mind. “Bats aren’t traditionally the most beautiful or popular animals. But they’re amazing creatures that are a big part of our ecosystem, especially regarding pest control.”

Scientists estimate that insect-eating bats save U.S. farmers billions of dollars each year by reducing crop damage and limiting the need for pesticides. And over 300 species of fruit depend on bats for pollination.

What’s more: Bats are now facing new, unprecedented threats. That’s why Hartis is leading a project at Duke Energy to develop a new approach to protect them. Known as a Habitat Conservation Plan (HCP), the project will create one of the largest utility-based HCPs in the country to focus on bats and vegetation management.

Why a new approach is needed

Vegetation management, including tree trimming and removal, is necessary as the company makes strategic grid investments to enhance reliability for 8.4 million electric utility customers across six states. But trees are also a crucial part of the ecosystem and natural beauty of our service areas, as well as habitats for many species including bats. When not hibernating, many live in trees and raise their young in the crevasses of the bark or within branches and leaf clusters.

“It’s not either/or. As a company, we have to do both,” said Scott Fletcher, manager of Duke Energy’s Natural Resources group. “Advancing our clean energy transition requires the management of vegetation and a continued commitment to environmental stewardship and biodiversity.”

In the past, only a few species in the company’s service area were designated as endangered by the U.S. Fish and Wildlife Service (USFWS), so Duke Energy could address potential impacts by seasonally restricting work and obtaining permits on a project-by-project basis. That has changed as scientists monitor substantial declines in bat populations.

Eight species are now categorized as federally endangered or threatened. White-nose syndrome, an invasive fungal disease, is a leading cause of this decline.

“Today, the bats we need to protect are potentially everywhere and nowhere at once,” Hartis said. “Some bat species’ range includes nearly the whole Eastern United States, and pretty much any tree could be their home.”

“Given the increased scope of the problem, our old approach of tree-by-tree avoidance simply isn’t feasible,” Fletcher added. “It wouldn’t be good for our customers, good for our crews, or for the bats. We realized that we need to develop a new way forward.”

What makes an HCP different?

The company realized a broader, more inclusive approach was needed, one that would protect covered bats while also facilitating necessary utility work along Duke Energy’s more than 380,000 miles of right of way.

“We are developing an HCP because it is a comprehensive, big-picture approach,” Fletcher said. “It’s a cooperative effort between Duke Energy and USFWS, and a great example of bringing the private and public sectors together to work on challenging problems.”

Cooperation and coordination are essential as the company sets an ambitious goal to avoid, minimize and mitigate impacts to covered bats, as well as support for long-term bat conservation through land management, conservation and protection.

A plan of this scope doesn’t happen overnight. The company began initial outreach to stakeholders and data assembly in late 2023. Now they are in the process of collaborating with USFWS and will be working through the service’s formal public involvement process until mid-2025, with a goal of permit issuance by 2026.

“That may seem like a long timeline, but it’s very reasonable considering the scale of the project,” Hartis said. “You have to remember that this HCP is very large and geographically diverse – it’s designed to cover all parts of our service area, from the Midwest to the Carolinas and Florida.”

Fletcher added, “Plus, the permit will last up to 30 years. That will mean greater certainty and efficiency for all parties. Having a plan like this in place will help to streamline our work, which in turn helps to control costs and speed advancements for our customers while also creating benefits for bats.”

Endangered Species Conservation Fund

Showing their support for the project, the U.S. Fish and Wildlife Service awarded Duke Energy a $1 million grant for 2024-2025, with the option to reapply annually, to facilitate the development of the HCP.

Leading the way

Innovation is a key component of Duke Energy’s planning for the future – but innovation isn’t just for power plants or grid technology. Innovative re-thinking is helping the company develop new comprehensive planning to protect bats while also making improvements to better serve customers.

The project could be a step forward for the utility industry. As one of the first utilities to pursue an HCP specifically for bats and vegetation management, Hartis said the company could establish an industry standard.

“It’s incredibly exciting to see Duke Energy take on something of this scale,” he said. “And I love making a difference for endangered bat species – especially because they are so frequently misunderstood. Hopefully, everyone will get more of an opportunity to get to know and appreciate bats.”

View original content here.

By Emry McKinney | illumination Contributor

If bats make you think of Halloween and spooky movies, Brett Hartis, lead scientist in Duke Energy’s Environmental Sciences group, would like to change your mind. “Bats aren’t traditionally the most beautiful or popular animals. But they’re amazing creatures that are a big part of our ecosystem, especially regarding pest control.”

Scientists estimate that insect-eating bats save U.S. farmers billions of dollars each year by reducing crop damage and limiting the need for pesticides. And over 300 species of fruit depend on bats for pollination.

What’s more: Bats are now facing new, unprecedented threats. That’s why Hartis is leading a project at Duke Energy to develop a new approach to protect them. Known as a Habitat Conservation Plan (HCP), the project will create one of the largest utility-based HCPs in the country to focus on bats and vegetation management.

Why a new approach is needed

Vegetation management, including tree trimming and removal, is necessary as the company makes strategic grid investments to enhance reliability for 8.4 million electric utility customers across six states. But trees are also a crucial part of the ecosystem and natural beauty of our service areas, as well as habitats for many species including bats. When not hibernating, many live in trees and raise their young in the crevasses of the bark or within branches and leaf clusters.

“It’s not either/or. As a company, we have to do both,” said Scott Fletcher, manager of Duke Energy’s Natural Resources group. “Advancing our clean energy transition requires the management of vegetation and a continued commitment to environmental stewardship and biodiversity.”

In the past, only a few species in the company’s service area were designated as endangered by the U.S. Fish and Wildlife Service (USFWS), so Duke Energy could address potential impacts by seasonally restricting work and obtaining permits on a project-by-project basis. That has changed as scientists monitor substantial declines in bat populations.

Eight species are now categorized as federally endangered or threatened. White-nose syndrome, an invasive fungal disease, is a leading cause of this decline.

“Today, the bats we need to protect are potentially everywhere and nowhere at once,” Hartis said. “Some bat species’ range includes nearly the whole Eastern United States, and pretty much any tree could be their home.”

“Given the increased scope of the problem, our old approach of tree-by-tree avoidance simply isn’t feasible,” Fletcher added. “It wouldn’t be good for our customers, good for our crews, or for the bats. We realized that we need to develop a new way forward.”

What makes an HCP different?

The company realized a broader, more inclusive approach was needed, one that would protect covered bats while also facilitating necessary utility work along Duke Energy’s more than 380,000 miles of right of way.

“We are developing an HCP because it is a comprehensive, big-picture approach,” Fletcher said. “It’s a cooperative effort between Duke Energy and USFWS, and a great example of bringing the private and public sectors together to work on challenging problems.”

Cooperation and coordination are essential as the company sets an ambitious goal to avoid, minimize and mitigate impacts to covered bats, as well as support for long-term bat conservation through land management, conservation and protection.

A plan of this scope doesn’t happen overnight. The company began initial outreach to stakeholders and data assembly in late 2023. Now they are in the process of collaborating with USFWS and will be working through the service’s formal public involvement process until mid-2025, with a goal of permit issuance by 2026.

“That may seem like a long timeline, but it’s very reasonable considering the scale of the project,” Hartis said. “You have to remember that this HCP is very large and geographically diverse – it’s designed to cover all parts of our service area, from the Midwest to the Carolinas and Florida.”

Fletcher added, “Plus, the permit will last up to 30 years. That will mean greater certainty and efficiency for all parties. Having a plan like this in place will help to streamline our work, which in turn helps to control costs and speed advancements for our customers while also creating benefits for bats.”

Endangered Species Conservation Fund

Showing their support for the project, the U.S. Fish and Wildlife Service awarded Duke Energy a $1 million grant for 2024-2025, with the option to reapply annually, to facilitate the development of the HCP.

Leading the way

Innovation is a key component of Duke Energy’s planning for the future – but innovation isn’t just for power plants or grid technology. Innovative re-thinking is helping the company develop new comprehensive planning to protect bats while also making improvements to better serve customers.

The project could be a step forward for the utility industry. As one of the first utilities to pursue an HCP specifically for bats and vegetation management, Hartis said the company could establish an industry standard.

“It’s incredibly exciting to see Duke Energy take on something of this scale,” he said. “And I love making a difference for endangered bat species – especially because they are so frequently misunderstood. Hopefully, everyone will get more of an opportunity to get to know and appreciate bats.”

View original content here.

SLB has released 2023 Women and Pay—Improving Gender Harmony at SLB, the second in a biennial series aimed at increasing transparency of the company’s pay practices for employees and external stakeholders.

This report is an important tool for identifying key focus areas and actionable strategies to achieve gender balance at all levels of SLB.

“As part of our diversity efforts, we are committed to increasing representation across the company,” says Carlos Sarmiento, director, Culture, Diversity, and Inclusion. “But more than that, we want to foster a culture of belonging. When we have gender harmony, we have an environment where employees feel respected and valued.”

The report analyzed pay data for SLB’s salaried workforce, comparing the base salaries for male and female employees in similar roles and levels of responsibility. The aggregate data showed an average global pay gap of 2.37% and a median global pay gap of 1.76%, both favoring men.

Since the last report, SLB has taken actions to successfully narrow the equal pay gap distribution, with a focus on reducing the larger equal pay gaps and have the majority be within 2%. Of the equal pay gaps, 40.33% were within 2%—an improvement from 31.63% over the past two years.

“Using the data-based findings from these reports, we have taken strategic actions to reduce the equal pay gap at SLB. I am proud to say that in the last two years, since the first report came out, we have made consistent progress,” says Carmen Rando Béjar, chief people officer. “However, this is an ongoing process, and we will continue to gather data and identify more initiatives as part of our goal to achieve gender balance and further build an inclusive company culture.”

Various internal and external factors influence the equal pay gap. To broaden its analysis with new data points, SLB examined this gap through the lens of parenthood. Consistent with Nobel Prize-winning economist Claudia Goldin’s research, it was found that the more children a female employee has, the wider the pay gap. This data allows SLB to take a holistic view of the factors driving the pay gap and develop targeted initiatives for improvement.

SLB’s recognition at the World 50 2024 Inclusion and Diversity Impact Awards underscores the company’s commitment to further narrow the equal pay gap. This year, SLB was a finalist in the Transparency Award category, which honors organizations that openly declare their positions and share their goals for improvement in diversity and inclusion.

To learn more about what SLB is doing to improve gender balance and to review data results from the report, visit www.slb.com/2023WomenAndPayReport.

View original content here.

SLB has released 2023 Women and Pay—Improving Gender Harmony at SLB, the second in a biennial series aimed at increasing transparency of the company’s pay practices for employees and external stakeholders.

This report is an important tool for identifying key focus areas and actionable strategies to achieve gender balance at all levels of SLB.

“As part of our diversity efforts, we are committed to increasing representation across the company,” says Carlos Sarmiento, director, Culture, Diversity, and Inclusion. “But more than that, we want to foster a culture of belonging. When we have gender harmony, we have an environment where employees feel respected and valued.”

The report analyzed pay data for SLB’s salaried workforce, comparing the base salaries for male and female employees in similar roles and levels of responsibility. The aggregate data showed an average global pay gap of 2.37% and a median global pay gap of 1.76%, both favoring men.

Since the last report, SLB has taken actions to successfully narrow the equal pay gap distribution, with a focus on reducing the larger equal pay gaps and have the majority be within 2%. Of the equal pay gaps, 40.33% were within 2%—an improvement from 31.63% over the past two years.

“Using the data-based findings from these reports, we have taken strategic actions to reduce the equal pay gap at SLB. I am proud to say that in the last two years, since the first report came out, we have made consistent progress,” says Carmen Rando Béjar, chief people officer. “However, this is an ongoing process, and we will continue to gather data and identify more initiatives as part of our goal to achieve gender balance and further build an inclusive company culture.”

Various internal and external factors influence the equal pay gap. To broaden its analysis with new data points, SLB examined this gap through the lens of parenthood. Consistent with Nobel Prize-winning economist Claudia Goldin’s research, it was found that the more children a female employee has, the wider the pay gap. This data allows SLB to take a holistic view of the factors driving the pay gap and develop targeted initiatives for improvement.

SLB’s recognition at the World 50 2024 Inclusion and Diversity Impact Awards underscores the company’s commitment to further narrow the equal pay gap. This year, SLB was a finalist in the Transparency Award category, which honors organizations that openly declare their positions and share their goals for improvement in diversity and inclusion.

To learn more about what SLB is doing to improve gender balance and to review data results from the report, visit www.slb.com/2023WomenAndPayReport.

View original content here.

SLB has released 2023 Women and Pay—Improving Gender Harmony at SLB, the second in a biennial series aimed at increasing transparency of the company’s pay practices for employees and external stakeholders.

This report is an important tool for identifying key focus areas and actionable strategies to achieve gender balance at all levels of SLB.

“As part of our diversity efforts, we are committed to increasing representation across the company,” says Carlos Sarmiento, director, Culture, Diversity, and Inclusion. “But more than that, we want to foster a culture of belonging. When we have gender harmony, we have an environment where employees feel respected and valued.”

The report analyzed pay data for SLB’s salaried workforce, comparing the base salaries for male and female employees in similar roles and levels of responsibility. The aggregate data showed an average global pay gap of 2.37% and a median global pay gap of 1.76%, both favoring men.

Since the last report, SLB has taken actions to successfully narrow the equal pay gap distribution, with a focus on reducing the larger equal pay gaps and have the majority be within 2%. Of the equal pay gaps, 40.33% were within 2%—an improvement from 31.63% over the past two years.

“Using the data-based findings from these reports, we have taken strategic actions to reduce the equal pay gap at SLB. I am proud to say that in the last two years, since the first report came out, we have made consistent progress,” says Carmen Rando Béjar, chief people officer. “However, this is an ongoing process, and we will continue to gather data and identify more initiatives as part of our goal to achieve gender balance and further build an inclusive company culture.”

Various internal and external factors influence the equal pay gap. To broaden its analysis with new data points, SLB examined this gap through the lens of parenthood. Consistent with Nobel Prize-winning economist Claudia Goldin’s research, it was found that the more children a female employee has, the wider the pay gap. This data allows SLB to take a holistic view of the factors driving the pay gap and develop targeted initiatives for improvement.

SLB’s recognition at the World 50 2024 Inclusion and Diversity Impact Awards underscores the company’s commitment to further narrow the equal pay gap. This year, SLB was a finalist in the Transparency Award category, which honors organizations that openly declare their positions and share their goals for improvement in diversity and inclusion.

To learn more about what SLB is doing to improve gender balance and to review data results from the report, visit www.slb.com/2023WomenAndPayReport.

View original content here.

Kent Hargis, PhD| Chief Investment Officer—Strategic Core Equities; Portfolio Manager—Global Low Carbon Strategy

Teresa Keane| Managing Director—Equities

Brian Holland, CFA| Portfolio Manager and Senior Research Analyst—International Strategic Core Equities

Investors seeking to reduce climate risk in targeted equity strategies might not be aware of hidden hazards to portfolio construction. Climate-focused benchmarks have big positions in US heavyweight stocks, which adds concentration risk and mutes portfolio diversification benefits.

There are different ways for equity portfolios to address climate-related issues. Some might focus on companies that help solve climate challenges, while others target firms with lower carbon emissions than their peers. Another approach is to focus on companies that are integral to the energy transition across diverse sectors and industries.

Whatever approach an investor chooses, we believe it’s important to manage a climate-related portfolio with the same research rigor and risk management as any other active equity strategy. That means ensuring that the portfolio has adequate diversification.

Heavy Weights in US Mega-Caps

Passive approaches to climate-focused investing may lack that diversification. That’s because key climate benchmarks are prone to heavy concentration in a small group of giant US stocks—just like broad cap-weighted benchmarks. 

It sounds surprising. After all, you would expect a climate-focused benchmark to have much different positions than the broad equity market. But in fact, the MSCI World Climate Paris Aligned Index is heavily concentrated in the same stocks that dominate the MSCI World broad market index. This is largely by design, as climate indices typically seek to limit tracking error to the broader market index.

As a result, the weight of the 10 largest stocks in the MSCI World Climate Paris Aligned Index has more than doubled since 2017, to 26% (Display), higher than their weight in the MSCI World. Most of the 10 biggest stocks in the MSCI World Climate benchmark are the same as those in the MSCI World and S&P 500, such as NVIDIA, Apple and Microsoft. And the top 10 account for 33.5% of the MSCI World Climate Paris Aligned Index risk, versus 31.4% of the MSCI World risk.

To be sure, the US megacaps, also known as the Magnificent Seven, include some excellent businesses. However, we think it’s risky to own the entire group at benchmark weights, and the recent divergence in returns of the Mag Seven reinforces the case for selective stock picking. In any equity strategy, portfolio managers should own each stock based on the strategy’s philosophy while also paying attention to its overall risk characteristics. These principles apply to climate portfolios, too.

Diversifying Return Streams in Climate Portfolios

Effective low-carbon equity strategies involve more than just vetting companies for carbon emissions. Many other variables must be weighed too, since so much can determine a stock’s risk/reward profile beyond the long arm of climate change.

In climate portfolios, we believe investors should search across sectors and industries for high-quality companies that are transitioning to a lower-carbon economy. These include enablers, implementers and beneficiaries of the transition that play instrumental roles in the global energy transformation but whose carbon emission scores may not reflect that.

That’s why company fundamentals such as profitability and capital discipline are equally vital inputs in active climate-focused strategies. Strong fundamentals help quality businesses surmount macro hurdles beyond climate risks, such as inflation and higher interest rates. Attractive share valuations support return potential and help investors avoid risks in expensive parts of the market. We believe that integrating these three targets in stock selection—quality, climate and price—can better align a portfolio’s climate goals with investors’ long-term financial objectives and risk appetite (Display). Today, heightened political and geopolitical risk makes it especially important to apply thorough fundamental research to stock selection in a climate-focused portfolio.

Investors seeking a climate-focused portfolio should also think about how it fits into a broader equity allocation. The heavy concentration of the MSCI World Climate Paris Aligned Index in giant US stocks could lead investors to inadvertently double down on absolute risk if they hold similar large weights in the same companies in a US or global equity allocation.

Diversification is the cornerstone of prudent, risk-aware equity investing. Climate-focused investing is no different—long-term investing success depends on the real diversification of businesses and return streams, both within a portfolio and versus a broader equity allocation.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to change over time.

MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein.

The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.

References to specific securities discussed are for illustrative purposes only and are not to be considered recommendations by AllianceBernstein L.P.

Learn more about AB’s approach to responsibility here.

Kent Hargis, PhD| Chief Investment Officer—Strategic Core Equities; Portfolio Manager—Global Low Carbon Strategy

Teresa Keane| Managing Director—Equities

Brian Holland, CFA| Portfolio Manager and Senior Research Analyst—International Strategic Core Equities

Investors seeking to reduce climate risk in targeted equity strategies might not be aware of hidden hazards to portfolio construction. Climate-focused benchmarks have big positions in US heavyweight stocks, which adds concentration risk and mutes portfolio diversification benefits.

There are different ways for equity portfolios to address climate-related issues. Some might focus on companies that help solve climate challenges, while others target firms with lower carbon emissions than their peers. Another approach is to focus on companies that are integral to the energy transition across diverse sectors and industries.

Whatever approach an investor chooses, we believe it’s important to manage a climate-related portfolio with the same research rigor and risk management as any other active equity strategy. That means ensuring that the portfolio has adequate diversification.

Heavy Weights in US Mega-Caps

Passive approaches to climate-focused investing may lack that diversification. That’s because key climate benchmarks are prone to heavy concentration in a small group of giant US stocks—just like broad cap-weighted benchmarks. 

It sounds surprising. After all, you would expect a climate-focused benchmark to have much different positions than the broad equity market. But in fact, the MSCI World Climate Paris Aligned Index is heavily concentrated in the same stocks that dominate the MSCI World broad market index. This is largely by design, as climate indices typically seek to limit tracking error to the broader market index.

As a result, the weight of the 10 largest stocks in the MSCI World Climate Paris Aligned Index has more than doubled since 2017, to 26% (Display), higher than their weight in the MSCI World. Most of the 10 biggest stocks in the MSCI World Climate benchmark are the same as those in the MSCI World and S&P 500, such as NVIDIA, Apple and Microsoft. And the top 10 account for 33.5% of the MSCI World Climate Paris Aligned Index risk, versus 31.4% of the MSCI World risk.

To be sure, the US megacaps, also known as the Magnificent Seven, include some excellent businesses. However, we think it’s risky to own the entire group at benchmark weights, and the recent divergence in returns of the Mag Seven reinforces the case for selective stock picking. In any equity strategy, portfolio managers should own each stock based on the strategy’s philosophy while also paying attention to its overall risk characteristics. These principles apply to climate portfolios, too.

Diversifying Return Streams in Climate Portfolios

Effective low-carbon equity strategies involve more than just vetting companies for carbon emissions. Many other variables must be weighed too, since so much can determine a stock’s risk/reward profile beyond the long arm of climate change.

In climate portfolios, we believe investors should search across sectors and industries for high-quality companies that are transitioning to a lower-carbon economy. These include enablers, implementers and beneficiaries of the transition that play instrumental roles in the global energy transformation but whose carbon emission scores may not reflect that.

That’s why company fundamentals such as profitability and capital discipline are equally vital inputs in active climate-focused strategies. Strong fundamentals help quality businesses surmount macro hurdles beyond climate risks, such as inflation and higher interest rates. Attractive share valuations support return potential and help investors avoid risks in expensive parts of the market. We believe that integrating these three targets in stock selection—quality, climate and price—can better align a portfolio’s climate goals with investors’ long-term financial objectives and risk appetite (Display). Today, heightened political and geopolitical risk makes it especially important to apply thorough fundamental research to stock selection in a climate-focused portfolio.

Investors seeking a climate-focused portfolio should also think about how it fits into a broader equity allocation. The heavy concentration of the MSCI World Climate Paris Aligned Index in giant US stocks could lead investors to inadvertently double down on absolute risk if they hold similar large weights in the same companies in a US or global equity allocation.

Diversification is the cornerstone of prudent, risk-aware equity investing. Climate-focused investing is no different—long-term investing success depends on the real diversification of businesses and return streams, both within a portfolio and versus a broader equity allocation.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to change over time.

MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein.

The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.

References to specific securities discussed are for illustrative purposes only and are not to be considered recommendations by AllianceBernstein L.P.

Learn more about AB’s approach to responsibility here.

Kent Hargis, PhD| Chief Investment Officer—Strategic Core Equities; Portfolio Manager—Global Low Carbon Strategy

Teresa Keane| Managing Director—Equities

Brian Holland, CFA| Portfolio Manager and Senior Research Analyst—International Strategic Core Equities

Investors seeking to reduce climate risk in targeted equity strategies might not be aware of hidden hazards to portfolio construction. Climate-focused benchmarks have big positions in US heavyweight stocks, which adds concentration risk and mutes portfolio diversification benefits.

There are different ways for equity portfolios to address climate-related issues. Some might focus on companies that help solve climate challenges, while others target firms with lower carbon emissions than their peers. Another approach is to focus on companies that are integral to the energy transition across diverse sectors and industries.

Whatever approach an investor chooses, we believe it’s important to manage a climate-related portfolio with the same research rigor and risk management as any other active equity strategy. That means ensuring that the portfolio has adequate diversification.

Heavy Weights in US Mega-Caps

Passive approaches to climate-focused investing may lack that diversification. That’s because key climate benchmarks are prone to heavy concentration in a small group of giant US stocks—just like broad cap-weighted benchmarks. 

It sounds surprising. After all, you would expect a climate-focused benchmark to have much different positions than the broad equity market. But in fact, the MSCI World Climate Paris Aligned Index is heavily concentrated in the same stocks that dominate the MSCI World broad market index. This is largely by design, as climate indices typically seek to limit tracking error to the broader market index.

As a result, the weight of the 10 largest stocks in the MSCI World Climate Paris Aligned Index has more than doubled since 2017, to 26% (Display), higher than their weight in the MSCI World. Most of the 10 biggest stocks in the MSCI World Climate benchmark are the same as those in the MSCI World and S&P 500, such as NVIDIA, Apple and Microsoft. And the top 10 account for 33.5% of the MSCI World Climate Paris Aligned Index risk, versus 31.4% of the MSCI World risk.

To be sure, the US megacaps, also known as the Magnificent Seven, include some excellent businesses. However, we think it’s risky to own the entire group at benchmark weights, and the recent divergence in returns of the Mag Seven reinforces the case for selective stock picking. In any equity strategy, portfolio managers should own each stock based on the strategy’s philosophy while also paying attention to its overall risk characteristics. These principles apply to climate portfolios, too.

Diversifying Return Streams in Climate Portfolios

Effective low-carbon equity strategies involve more than just vetting companies for carbon emissions. Many other variables must be weighed too, since so much can determine a stock’s risk/reward profile beyond the long arm of climate change.

In climate portfolios, we believe investors should search across sectors and industries for high-quality companies that are transitioning to a lower-carbon economy. These include enablers, implementers and beneficiaries of the transition that play instrumental roles in the global energy transformation but whose carbon emission scores may not reflect that.

That’s why company fundamentals such as profitability and capital discipline are equally vital inputs in active climate-focused strategies. Strong fundamentals help quality businesses surmount macro hurdles beyond climate risks, such as inflation and higher interest rates. Attractive share valuations support return potential and help investors avoid risks in expensive parts of the market. We believe that integrating these three targets in stock selection—quality, climate and price—can better align a portfolio’s climate goals with investors’ long-term financial objectives and risk appetite (Display). Today, heightened political and geopolitical risk makes it especially important to apply thorough fundamental research to stock selection in a climate-focused portfolio.

Investors seeking a climate-focused portfolio should also think about how it fits into a broader equity allocation. The heavy concentration of the MSCI World Climate Paris Aligned Index in giant US stocks could lead investors to inadvertently double down on absolute risk if they hold similar large weights in the same companies in a US or global equity allocation.

Diversification is the cornerstone of prudent, risk-aware equity investing. Climate-focused investing is no different—long-term investing success depends on the real diversification of businesses and return streams, both within a portfolio and versus a broader equity allocation.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to change over time.

MSCI makes no express or implied warranties or representations, and shall have no liability whatsoever with respect to any MSCI data contained herein.

The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI.

References to specific securities discussed are for illustrative purposes only and are not to be considered recommendations by AllianceBernstein L.P.

Learn more about AB’s approach to responsibility here.

YKK Corporation has released “This is YKK 2024” Integrated Report showcasing notable progress in its journey toward climate neutrality and environmental stewardship. The company has slashed its greenhouse gas emissions by more than half since 2018, while dramatically expanding its use of sustainable materials across its global operations.

Key Achievements

Emissions Reduction: Cut direct emissions (Scope 1+2) by 56.2% from 2018 levelsRenewable Energy: 37 facilities now running on 100% renewable energySustainable Materials: 38% of materials now from sustainable sources, up 12 percentage points in one yearWater Conservation: Reduced water consumption by 22.1% since 2018Waste Management: Achieved 91.9% waste recycling rate

YKK’s Sustainability Vision 2050 aims for climate neutrality and coexistence with nature by 2050. The company targets 10 SDGs through themes of climate change, material resources, water resources, chemical management, and respect for people. Progress is detailed in the Integrated Report, with additional data on environment, society, governance, and finance in the Data Book.

Innovation Highlights

Copper and Zinc Recycling: Developed proprietary in-house recycling technology for copper and zinc alloys used in YKK® zippersSustainable Packaging: Switched to Forest Stewardship Council® (FSC®)-certified packaging at the Kurobe Manufacturing CenterChemical Management: AcroPlating® technology now accounts for 25% of brass slider sales, a 7-point increase from last year.Product Longevity: Launched the Revived Renewal Series to extend zipper lifespan

Environmental Recognition

The company’s dedication to biodiversity has been acknowledged with the designation of YKK Center Park’s Furusato-no-Mori (Hometown Forest) as a Nature Coexistence Site, underscoring YKK’s leadership in corporate environmental stewardship.

Looking Forward

Building on these achievements, YKK has revised its Sustainability Vision 2050 to strengthen its focus on three critical areas:

Climate change mitigationBiodiversity protectionResource recycling

The company plans to further accelerate its sustainability initiatives throughout its supply chain, working closely with partners to address environmental challenges in the garment industry.

Full List of FY2023 Initiatives for Achieving Sustainability Objectives

Climate change

Scope 1+2 GHG emissions: 238,812t (56.2% reduction from FY2018 baseline)Scope 3 GHG emissions: 587,848t (32.7% reduction from FY2018 baseline)Renewable energy usage: 56.5%37 locations are powered entirely by renewable energy.Ten new solar power generation facilities in operation (28 total)

Material resources

38% of materials now from sustainable sources, up 12 percentage points in one year31% of packaging is now sustainableYKK JAPAN Company (Kurobe Manufacturing Center) replaced the main outer packaging cardboard for fastening products with packaging which uses paper certified by the Forest Stewardship Council® (FSC®)Waste recycling rate: 91.9%*2Conducted a survey of suppliers that already do business with YKK, or plan to do business with YKK, to determine whether they are certified with The Copper MarkLaunched the Revived Renewal Series of products that contributes to the longevity of garments life cycleEstablished in-house recycling technology and operational flow for copper and zinc alloys used in YKK® zippersYKK Center Park’s Furusato-no-Mori (Hometown Forest) designated as a Nature Coexistence Site

Water resources

Water intake: 8.898 million t (22.1% reduction compared to FY2018)Water intensity: 13.1% reduction (compared to FY2022)Introduced manufacturing equipment designed to reduce water consumption.Conducted wastewater management studies based on ZDHC Wastewater GuidelinesAnalyzed water risks at each manufacturing site

Chemical management

Informed suppliers about the YKK RSL (2023 version) and conducted compliance surveys (1,663 companies)Conducting annual revisions of in-house standards (YKK RSL*) (2024 version) based on social and customer needsConducted tests to monitor status of compliance with the OEKO-TEX® STANDARD 100 certification and the AFIRM RSLGlobally deployed the ZDHC MRSL compliance level assessment systemSelected alternative materials for non-compliant materials in the YKK RSL (2023 version) and promoted the development of materials, manufacturing processes, etc.Conducted fluorine testing of all purchased materials and switched to materials that are alternatives to per-and polyfluoroalkyl substances (PFAS) wherever possibleAcroPlating® technology unit sales volume as a percentage of brass sliders: 25% (+7 points year-on-year)

Respect people

Implemented YGCC self-checks/audits at all applicable locations (ongoing)Based on the results of implementation, identified issues to be addressed and developed plans for implementation

1 The Forest Stewardship Council® (License number: FSC®-C192280) 
2 According to the definition of “recycling” under Japanese law, includes material recycling and thermal recovery. 

YKK Corporation of America Corporate Communications

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YKK Corporation has released “This is YKK 2024” Integrated Report showcasing notable progress in its journey toward climate neutrality and environmental stewardship. The company has slashed its greenhouse gas emissions by more than half since 2018, while dramatically expanding its use of sustainable materials across its global operations.

Key Achievements

Emissions Reduction: Cut direct emissions (Scope 1+2) by 56.2% from 2018 levelsRenewable Energy: 37 facilities now running on 100% renewable energySustainable Materials: 38% of materials now from sustainable sources, up 12 percentage points in one yearWater Conservation: Reduced water consumption by 22.1% since 2018Waste Management: Achieved 91.9% waste recycling rate

YKK’s Sustainability Vision 2050 aims for climate neutrality and coexistence with nature by 2050. The company targets 10 SDGs through themes of climate change, material resources, water resources, chemical management, and respect for people. Progress is detailed in the Integrated Report, with additional data on environment, society, governance, and finance in the Data Book.

Innovation Highlights

Copper and Zinc Recycling: Developed proprietary in-house recycling technology for copper and zinc alloys used in YKK® zippersSustainable Packaging: Switched to Forest Stewardship Council® (FSC®)-certified packaging at the Kurobe Manufacturing CenterChemical Management: AcroPlating® technology now accounts for 25% of brass slider sales, a 7-point increase from last year.Product Longevity: Launched the Revived Renewal Series to extend zipper lifespan

Environmental Recognition

The company’s dedication to biodiversity has been acknowledged with the designation of YKK Center Park’s Furusato-no-Mori (Hometown Forest) as a Nature Coexistence Site, underscoring YKK’s leadership in corporate environmental stewardship.

Looking Forward

Building on these achievements, YKK has revised its Sustainability Vision 2050 to strengthen its focus on three critical areas:

Climate change mitigationBiodiversity protectionResource recycling

The company plans to further accelerate its sustainability initiatives throughout its supply chain, working closely with partners to address environmental challenges in the garment industry.

Full List of FY2023 Initiatives for Achieving Sustainability Objectives

Climate change

Scope 1+2 GHG emissions: 238,812t (56.2% reduction from FY2018 baseline)Scope 3 GHG emissions: 587,848t (32.7% reduction from FY2018 baseline)Renewable energy usage: 56.5%37 locations are powered entirely by renewable energy.Ten new solar power generation facilities in operation (28 total)

Material resources

38% of materials now from sustainable sources, up 12 percentage points in one year31% of packaging is now sustainableYKK JAPAN Company (Kurobe Manufacturing Center) replaced the main outer packaging cardboard for fastening products with packaging which uses paper certified by the Forest Stewardship Council® (FSC®)Waste recycling rate: 91.9%*2Conducted a survey of suppliers that already do business with YKK, or plan to do business with YKK, to determine whether they are certified with The Copper MarkLaunched the Revived Renewal Series of products that contributes to the longevity of garments life cycleEstablished in-house recycling technology and operational flow for copper and zinc alloys used in YKK® zippersYKK Center Park’s Furusato-no-Mori (Hometown Forest) designated as a Nature Coexistence Site

Water resources

Water intake: 8.898 million t (22.1% reduction compared to FY2018)Water intensity: 13.1% reduction (compared to FY2022)Introduced manufacturing equipment designed to reduce water consumption.Conducted wastewater management studies based on ZDHC Wastewater GuidelinesAnalyzed water risks at each manufacturing site

Chemical management

Informed suppliers about the YKK RSL (2023 version) and conducted compliance surveys (1,663 companies)Conducting annual revisions of in-house standards (YKK RSL*) (2024 version) based on social and customer needsConducted tests to monitor status of compliance with the OEKO-TEX® STANDARD 100 certification and the AFIRM RSLGlobally deployed the ZDHC MRSL compliance level assessment systemSelected alternative materials for non-compliant materials in the YKK RSL (2023 version) and promoted the development of materials, manufacturing processes, etc.Conducted fluorine testing of all purchased materials and switched to materials that are alternatives to per-and polyfluoroalkyl substances (PFAS) wherever possibleAcroPlating® technology unit sales volume as a percentage of brass sliders: 25% (+7 points year-on-year)

Respect people

Implemented YGCC self-checks/audits at all applicable locations (ongoing)Based on the results of implementation, identified issues to be addressed and developed plans for implementation

1 The Forest Stewardship Council® (License number: FSC®-C192280) 
2 According to the definition of “recycling” under Japanese law, includes material recycling and thermal recovery. 

YKK Corporation of America Corporate Communications

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