2021 ESG Annual Report

Our Net-Zero Commitment

Neuberger Berman recognizes the impact of climate change and the urgent need to accelerate the sustainable transition toward global net-zero emissions. We have long been committed to identifying and managing climate risks across our business and investment platform. In March 2019, we released our first Climate-Related Corporate Strategy in line with the recommendations of the Task Force on Climate-Related Disclosures. Since then, we have made substantial investments in data-driven climate scenario analysis capabilities, instituted its Thermal Coal Involvement Policy and expanded the number of climate-focused engagements we carry out with portfolio companies. Finally, in November 2021, we joined the Net Zero Asset Managers Initiative, committing to supporting investing aligned with net-zero emissions by 2050 or sooner. We draw on the practical work we have done in partnership with clients to share conclusions on the journey to net zero. 1. Carbon reductions today are more valuable than carbon reductions in the future. Carbon emissions are cumulative, as they stay in the atmosphere between 300 and 1,000 years. Reducing emissions now increases the probability of limiting global warming to 1.5C. 2. The initial 25 – 30% reduction in a portfolio’s carbon footprint is easier to achieve. The final 50% is harder, because it depends on companies’ adoption of nascent low carbon technologies. We recognize that each sector will decarbonize at a different rate, and have brought our Global Equity and Fixed Income research teams together with the ESG Investing team to determine sector-level alignment indicators that can be used by investment teams to measure progress toward net zero over time. 3. The earlier the net-zero goal, the more asset owners need to allocate to climate solutions. Our proprietary Climate-Integrated Strategic Asset Allocation has multiple levers that can be tailored according to client needs, including pension fund and insurance portfolios. The model can be modified to include climate-related risk and opportunities, and carbon footprint constraints. Using these inputs, we reconstruct a climate-integrated efficient frontier that can give directional insights to asset allocators. Our model suggests that there needs to be a shift to investing in low carbon solutions to achieve net-zero alignment.



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