Introducing Neuberger Berman’s Approach to ESG Investing

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  • 09 mins 34 secs

Learning: Unstructured

Jonathan Bailey, Head of ESG Investing at Neuberger Berman, discusses his approach to ESG Investing and what makes it different as well as current trends in ESG and what challenges he sees emerging in the future.
Channel: Sustainable Investing Hub

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It may contain errors and omissions.

Mhm. My name is Jonathan bailey and I'm the head of E. S. G. Investing at Neuberger Berman. I work with our portfolio managers and analysts across the firm to integrate TsG into our investment processes and lead our research on E. S. G. Topics and engagement with companies. Mm A. Neuberger Berman, we think we have a differentiated approach to investing because we put the S. G. At the core of the responsibilities on each of our equity credit and private markets research analysts. We engage with companies through our investment professionals because we believe that ultimately we can have a greater impact on the decision making of companies when it's tied to the investment decisions and when a Ceo or finance director or board member sits across the table from us, they know they're talking to the person who is ultimately going to change a portfolio based on the progress of that company is or is not making on environmental, social governance topics. We've also invested heavily in bringing proprietary insights to R. E. S. G. Analysis. R N B E S G quotient are proprietary actually, scoring system pulls in insights from our analysts as well as a range of academic and third party data sets to help us have a holistic understanding of the performance of an individual company and hence the risks in return that we want to be exposed to on behalf of our clients across portfolios. And then finally we think our approach is differentiated because we are focused on innovating sustainable and impact solutions that serve the needs of stakeholders. Take, for example are innovations around that zero and alignment with the paris agreement or our impact investing strategies in public markets and private markets. We really think that these are solving the challenges of the people and the planet as well as delivering strong financial returns for clients. Mm. Yeah. Mhm. It's a really exciting time to be focused on ESPN investing because we're seeing much greater attention on this across markets. You know, if you go back 5 10 years ago, this was primarily a conversation in inequities. But today everything from our private credits to our insurance mink strategies through to traditional sovereign debt and credit. E. S. U. Is a core part of investment processes across asset classes. And and that requires a nuanced approach to integration that understands the risk and return characteristics of each of those types of asset classes. Um And so you know what what you might look at as an equity investor where you've got in theory unlimited upside, you know, will be different than when you're investing in investment grade bonds. Where effectively you're you're really much more exposed to downside. Um Or if you're investing in a market that is perhaps less efficient with less disclosure like china a shares, you're gonna need to do a lot more primary research than you would in a a market like europe where european large cap companies provide a lot of data. So we're seeing a real focus on trends around that asset class specific integration, bringing much more of the nuance the table and of our clients wanting to make sure that S. G. Is a core part of really their full portfolio. So that's a really exciting trend that we're seeing at the moment. Another trend that I would focus on is this issue around climate. I think many of us are looking ahead to the cop 26 meetings later this year, which is being held in Glasgow and the attention that many institutions are placing on how they can position their portfolios to have exposure to the winners in the climate transition and to reduce their risk and exposure to Uh two sectors and companies that are likely to be disadvantaged. And so the work that we're doing to embed net zero alignment in portfolios and to be able to put climate risk analytics at the core of our portfolio construction process is a really exciting trend that we're excited to partner with clients on. Yeah. Yeah, engagement is obviously a really important part of our SG investing process. We've found that engagement isn't something that should be limited to equities and proxy voting, although of course that is important and it's really something that we do across all asset classes. We conduct, you know, hundreds of engagements on E. S. And G. Topics in corporate credit alone, for example, we do also engage with sovereign issuers and in our private markets portfolio is working with general partners uh in private equity, but obviously, you know, equities and proxy voting is really important. And there we think we've brought some innovations to the marketplace with an initiative that we call NV votes and that's to advance disclose how we will vote on a focus set of high profile important meetings each year. This this cycle, we provide advance disclosure on about 60 companies, everything from general electric, through to companies like Berkshire Hathaway, where we showed in about half the cases where we felt that management was doing something really constructive and positive and we were proud to lay out the logic for our support and about half the cases where we felt there was much more that the companies needed to do. So, for example, at Berkshire Hathaway, Despite Warren Buffett's long history of creating value, climate change is a pressing challenge for a conglomerate like that and disclosure does need to improve. And so we were clear in laying that out ahead of the vote and we were pleased that other shareholders shared that view and ultimately so significant support from the independent shareholders for the resolution around that topic. So engagement critical across asset classes, but really important that you actually are clear and public and transparent around it and we think things like RMB votes initiative help with providing that. Yeah, yeah, Well at Neuberger Berman, we're excited to offer a range of sustainable and impact solutions to clients we've recently expanded are offering in global and european sustainable equities um led by our team headquarters in the Hague who have a long track record of investing around sustainable Trends over the last 20 years. So we're excited about about that capability. We've also been innovating around climate, specifically multi-sector credit enabling clients who want to not have to make the short medium-term decisions around which sub asset classes within fixed income they want exposure to to come to us for a solution that provides them with that broad exposure. But with embedded in the investment process, a focus on net zero alignment. Uh and we're excited to be to be offering that net zero line multi sector credit capability. Um and uh and that's something that we think we're going to see many more institutions embrace. Mhm. Yeah. You know, one of the things that is just really important with the FD investing is that, you know what you're getting, because there's so much attention on this space and and there's there's obviously significant flows into funds that are focused on sustainable and impact objectives. And so we really think that you've got to hold yourself to transparency and accountability, which is why, you know, we're really pleased to have been named by the United Nations supported principles for responsible investment as one of only 20 investment managers in the world, as part of their leaders group for 2020 because it's a it's a sign that um an independent group is taking a look at what we're doing and and see some robustness in there. Um So we think that that being clear and transparent and innovating as expectations rise, and as more institutions are focusing on E. S. G uh is critical, I always say the client should partner with us, not because we're trying to lead on SD today, but because we're trying to lead on E S. G. Today, and we will be doing the same in five years as there's better data, better disclosure, more analytic capabilities. We want to make sure that we're still at the forefront in five years time and that's what my team and I are committed to doing.

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