Proprietary ESG Ratings and Analysis At Neuberger Berman, we have long believed that material ESG characteristics are an important driver of long-term returns. Our proprietary analyst-informed rating system, NB ESG Quotient, captures ESG considerations with potentially material impacts on financial performance at both the company and portfolio levels, and informs investment strategies across asset classes. Developed through a collaboration of the ESG Investing team and NB’s Global Equity and Fixed Income Research teams, this custom rating measures performance on ESG issues that we have identified as material across corporate and sovereign issuers. As shown in the NB Materiality Matrix, we have identified material ESG factors in each of 73 industries (e.g., privacy in the technology sector or raw material use in packaging). We then employ three broad tools to measure performance in each category: available third-party ESG data, non-traditional ESG data and, most significantly, input from our research analysts on hard-to-measure factors such as net-zero transition opportunities, equity, inclusion and diversity (“EID”), and expected governance impacts. The result is an industry- relative rating, or NB ESG Quotient, on separate Environmental and Social (ES) and Governance (G) characteristics for over 7,000 equities and 2,500 credit issuers. Over the past year, we have focused on two key aspects of our ESG analysis process: leveraging our dynamic model to consistently refine inputs and enhancing our use of non-traditional ESG data in partnership with our Data Science team.
We use Big Data to elevate our understanding of human capital trends by integrating alternative data from job postings, publicly available databases and employment review websites into the NB ESG Quotient.
16 2021 ESG ANNUAL REPORT
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