At Neuberger Berman, we believe the transition toward strong ESG performance is incremental, and our engagement provides guidance and support to issuers in improving their sustainability metrics, including issuers who are early in their ESG integration processes. In our view, working with companies that need the most guidance and support will not only help deliver on the financial objectives of our clients, but also their desire to make a long-term positive impact in the real world. Moreover, when properly deployed, the capital provided by our clients and others have the potential to help companies make this transition over time, both operationally through new products, services and technologies, as well as financially by reducing their ESG risks, thereby strengthening their overall credit profiles.

Rather than take a hard line of exclusion or divestment, we employ a “work-in-progress” approach to our engagements, where we look for the appropriate level of disclosure and goal-setting to increase our confidence in a company’s future. Where lacking or limited in scope, we challenge companies to reduce their risk profiles by setting clear objectives and holding them accountable through our engagement process. We keep our analysis and engagement in-house, leaning heavily on our credit analysts in the process given their intimate knowledge of issuers and sectors…

The expertise of our research analysts and portfolio managers along with the scale and reach of our fixed income platform allows Neuberger Berman to be well positioned to actively engage with issuers, sponsors, and capital market participants on ESG topics. The environmental and social crises resulting from global events in 2022 along with evolving material risk factors underscore our view that ESG integration and active engagement are important drivers of identifying material credit risks, which can impact the cost of an issuer’s capital. Complemented by the rigor of our fundamental credit research, our established engagement framework and trusted relationships with management teams encourage meaningful ESG engagements with the issuers. Across emerging and developed markets, we continue to grow our ESG capabilities with an aim to enhance our analysis of material risk factors and anticipate key changes affecting industries. In the upcoming years, we look forward to expanding our engagement efforts to further enhance issuers’ credit profiles.

More generally, the physical risk of climate change is becoming a key focus of analysis. Although in early stages, there is growing interest to expand risk assessments beyond greenhouse gases to broader environmental impact, such as biodiversity. In the social realm, stakeholders are increasingly looking for progress on equity, inclusion and diversity while governance also remains a core focus. Many of Neuberger Berman’s fixed income stakeholders continue to value our engagement efforts as a tool to address risks and pursue opportunities related to ESG.

Global Corporate Credit ESG Engagement Report