The World Bank

The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries to help fund capital projects. A project aimed to protect endangered black rhinos has garnered global attention. Black rhinos are a critically endangered species, and their population size reflects broader issues in biodiversity and conservation. Their endangerment is a good barometer of how these protected areas are faring. 

Our objective in this engagement was to craft an ESG-labeled bond issued by the World Bank that achieves improved biodiversity in South Africa by targeting growth in the black rhino population. The challenge in this project was that the Global Environment Facility (GEF) wanted to incentivize black rhino population growth, while gamekeepers wanted certainty of cash flows to help build a rhino-protection team. We met with the World Bank and Credit Suisse numerous times throughout 2022 to arrive at a transaction that satisfied all parties.

AB ultimately helped craft a bond whose coupon would be tied to the GEF success criteria, including a Conservation Success Payment that bondholders would receive if the black rhino population continued to grow in line with recent trends. This structure allowed investors to address black rhino population risk while gamekeepers were assured of consistent payments. This is one of the first biodiversity outcome–based bonds in the market.

Petrobras

Petrobras is a major state-owned oil and gas producer in Brazil that has one of the largest corporate carbon footprints in Latin America. AB is an investor participant in the Petrobras Climate Action 100+ (CA100+) investor cohort and has held a series of engagements on the company’s climate strategy since joining the initiative.

During AB’s tenure on this engagement, Petrobras has continued to progress its climate strategy, despite persistent changes in top leadership and operating in the context of a dynamic political environment. In particular, in line with guidance provided by AB and the CA100+ investor cohort, Petrobras has recently made decisive new commitments around its climate activities. The company has now pledged to achieve net zero greenhouse gas (GHG) emissions by 2050.

In the most recent Petrobras engagement, the Environmental Defense Fund (EDF) joined AB and the investor cohort to provide perspective and expertise on managing risks related to methane emissions, which are major contributors to climate change, given that methane’s warming potential is much greater than that of CO2.

AB and the other investors encouraged Petrobras to join the Oil and Gas Methane Partnership 2.0 (OGMP). Launched by the United Nations Environment Programme and the Climate and Clean Air Coalition, the OGMP is a multi-stakeholder initiative that works with major oil and gas companies to help tackle methane emissions, which pose financially material risks and opportunities to issuers that we seek to manage on behalf of our clients.

By joining OGMP, members commit to disclosing according to the OGMP reporting framework, which works to improve the transparency and accuracy of methane emissions reporting. In previous dialogues, Petrobras expressed concerns over the technical feasibility of adhering to this reporting framework, attributing this concern to particular features of the company’s offshore drilling operations. However, AB and the investors were able to leverage the expertise of EDF to help address some of these concerns. Petrobras has since indicated that the prospect of joining OGMP membership is currently progressing through its internal approval processes.

AB and the CA100+ investor cohort are encouraged by the progress made on evolving the company’s climate strategy, as well as efforts to take investor priorities seriously.

Trupanion

Trupanion is a pet insurance company based in the US. We engaged with Trupanion management and board members multiple times throughout 2022. As part of these conversations, we’ve shared examples of what AB views as best practices, including our view that we expect board declassification in coming years. Although the company was not ready to immediately commit to the measure, management noted our concern and said they would discuss.

In November 2022, the CEO noted that he wanted to declassify the board during the time frame of his succession from CEO (current title) to chair/CEO (2023—2025) to chairman (2025 and beyond), asking our advice for best practices on this process. 

We will continue to engage to monitor progress on board declassification.

Climate

Efforts to stem climate change are gaining momentum around the world. Many consumers, businesses and policymakers are recognizing the need for change.

• Cleaner energy
• Resource efficiency
• Sanitation and recycling
• Sustainable transportation

Health

Healthcare spending is rising, and people are living longer, which raises complex issues for access to high-quality and affordable medicine and long-term care.

• Access to quality care
• Food security and clean water
• Medical innovation
• Well-Being

Empowerment

Many sectors of society are marginalized by economic and social forces. Physical and technological infrastructure is needed to enable sustainable economic development, employment growth, poverty eradication and social inclusion.

• Education and employment services
• Financial security and inclusion
• Information and communication
• Sustainable infrastructure

Strong Institutions

Responsible sovereigns provide the foundation for the private sector to innovate and for effective and accountable public policymaking.

• Freedom and fundamental rights
• Anti-corruption and government
• Law and order