2021 ESG Annual Report

Dynamic Inputs & Data Science Insights As material ESG factors evolve, the NB ESG Quotient evolves with them. We review the factors with sector analysts at least annually to determine if new material factors have emerged and whether there is a more accurate way to capture them. Qualitative analyst inputs are generated by our central research analysts in partnership with the ESG Investing team for areas where there is limited data availability. Currently, our model includes over 40 custom analyst inputs. Furthermore, through our ongoing partnership with NB’s Data Science team, we also continuously integrate alternative data sources that go beyond third-party ratings. NB ESG Quotient already integrates alternative data from job postings, publicly available databases (OSHA, etc.), and employment review websites.

This year, we particularly focused on using Big Data to elevate our understanding of human capital trends. We onboarded a new dataset that allows us to conduct deep dives on companies where disclosure on EID is lacking. This collaboration between the Neuberger Berman ESG and Data Science teams led to the construction of 15 unique EID indicators. Through a historical backtesting exercise, we identified certain of these 15 indicators had a material impact on shareholder returns for the U.S. banking sector. We discovered that gender pay gap and minority pay gap in particular have historically been correlated with stock performance for this industry. These indicators were subsequently integrated into the NB Quotient for the U.S. banks. The ESG big data landscape is constantly evolving. We will continuously evaluate new and innovative data providers to enhance our proprietary ratings where corporate disclosure may be lacking.

HISTORICAL SHAREHOLDER RETURNS FOR U.S. BANKS DIFFERENTIATED BY GENDER PAY GAP

HISTORICAL SHAREHOLDER RETURNS FOR U.S. BANKS DIFFERENTIATED BY MINORITY PAY GAP

400%

400%

300%

300%

200%

200%

100%

100%

0%

0%

‘09

‘11

‘13

‘15

‘17

‘19

‘21

‘09

‘11

‘13

‘15

‘17

‘19

‘21

Minority Pay Gap - Low Performers Minority Pay Gap - High Performers

Gender Pay Gap - Low Performers Gender Pay Gap - High Performers

2021 ESG ANNUAL REPORT

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