Public fixed income investment specialists supported by the RI team include: Nuveen Taxable Fixed Income Nuveen Municipal Fixed Income, , Symphony Asset Management and NWQ. Real estate and private market debt investment specialists include; Nuveen Private Markets, Churchill Asset Management and Nuveen Real Estate debt. Each Nuveen investment specialist undertakes an approach to responsible investing that best aligns with their investment process, underlying assets and their unique strategy(ies) for pursuing competitive risk-adjusted returns. Across fixed income specialists, ESG integration and screening takes place in the following ways:

• Nuveen taxable fixed Income: In 2019, after in depth sector-specific ESG trainings, the taxable fixed income research team assigned proprietary ESG ratings to over 1200 corporate issuers by leveraging Nuveen’s RIDP and analysts’ in-depth knowledge of issuers.  The proprietary ESG ratings are embedded within investment platforms as we believe tightly embedding ESG conviction with credit views broadens the scope of our due diligence, financial modelling and engagement to better capture material information throughout the investment process. At the end of 2019, we started to develop ESG frameworks to support internal ESG ratings for other sub-sectors of the fixed income market, including sovereigns and structured securities.

• Nuveen municipal fixed income: Recognizing the lack of structured ESG data for municipal issuers and the complexity and the number of issuers in the municipal market, in 2019 we launched a data-driven scoring methodology  to assess the ESG performance of municipal issuers. The development of the models was a result of a two year partnership between the Responsible Investing team and the municipal fixed income credit research team. The models draw on publicly available datasets to measure ESG outcomes and leadership across eight municipal sectors. The data driven approach allowed us to assess the ESG performance of close to 20,000 municipal issuers (over 50% of Nuveen’s tax-exempt municipal holdings and over 66% of the Bloomberg Barclays Municipal Bond Index). ESG scores and data are fully integrated within investment research and trading platforms, allowing access for the entire municipal investment team. 

• Symphony Asset Management: Symphony is a long and short credit shop. Through collaboration with the Responsible Investing team, Symphony formally embedded ESG risk factors into its bottom up investment process in 2019.  Symphony leverages Nuveen’s RIDP, third party and a proprietary ESG questionnaire to create an internal ESG score that reflects an issuer’s ESG risks.  Where issuer data is not available in the public domain, Symphony engages with issuers or arrangers of leveraged loans/ high yield credit to glean additional information on the issuer’s ESG practices.  Symphony has embedded its ESG scores into the overall credit write-up for all new potential primary and secondary transactions and working to analyze  all existing positions in 2020.   Material ESG risks that impact an analyst’s credit views are formally discussed at Symphony’s investment committee meetings, held daily.

• Nuveen Private Markets and Churchill Asset Management: Private  debt teams use a proprietary ESG due diligence questionnaire to identify ESG-related issues and risks from a company/issuer, sector and geographic perspective. The questions represents our views of material risk as it relates to private debt. The results of the questionnaire are included in investment committee approval memos and any high risk concerns are discussed and need to be unanimously approved by the committee prior to investment.   

• Nuveen Real Estate: In 2019 real estate debt investment team engaged with Responsible Investing team through trainings on material ESG risks, with a focus on climate risk. When elevated ESG risks or opportunities are identified, the teams discuss prior to investment, where warranted. 

ESG-branded  fixed income strategies meet client demand by applying a mixture of thematic and screening ESG leadership and/or impact criteria. All ESG leadership and impact criteria are co-developed through partnership between the investment team and Responsible Investing team to meet intentional ESG and impact objectives, while ensuring flexibility to access competitive investment opportunities. Different types of screening strategies are applied to meet specific client objectives or firm-wide goals. Within ESG-branded fixed income strategies, we employ negative screening reflecting clients’ desires to avoid exposure to a  variety of business activities. In addition, all public market securities within the TIAA-CREF Funds Complex (CREF, TIAA-CREF Funds, TIAA Separate Account VA-1 and TIAA-CREF Life Funds) and the General Account avoid investment in four oil and gas companies that continue to have material operations in Sudan. 

The above provides details on the approaches across our fixed income investment specialists. Throughout this module, our responses reflect the practices implemented by investment specialists that hold majority of our fixed income assets under management.

Nuveen works with ESG research providers to broaden the scope and improve the quality of fixed income ESG research and data. We have engaged several providers to help expand issuer disclosure of ESG data, offer an investor perspective on potential new fixed income research products and help better integrate ESG issues into traditional credit ratings, including providing feedback from an ESG and investment perspective to a major credit ratings agency as they seek to expand their ESG offering. 

Muncipals: In 2019, we launched a proprietary data-driven municipal ESG scoring methodology, aligned with the UN SDGs, to asses ESG outcomes and performance across eight municipal sectors. The models leverage sector specific datasets from publicly available sources such as: U.S. Census data for cities, counties and states, Medicare data for hospitals and National Center for Education Statistics data for higher education and school districts. The ESG scores and data are embedded within the municipal credit research and trading platforms for automation and integration into investment processes. 

Private companies: For investment specialists investing in private companies, investment teams use proprietary ESG questionnaires as part of their ESG due diligence and credit underwriting processes. These questionnaires leverage industry accepted materiality frameworks as well as ESG data for public companies as comp sets. In addition, where available, third party materials (such as information from the equity sponsor, underwriter or a consulting firm) are used to bolster the due diligence and credit underwriting process. The Responsible Investing team in collaboration with the investment team regularly reviews proprietary frameworks and make updates where appropriate.

ESG-branded strategies apply explicit ESG criteria. For taxable fixed income ESG strategies, issuer- level and country-level ESG ratings and research are sourced from third party ESG research providers and for tax-exempt municipal ESG strategies, the proprietary ESG scores are leveraged to identify leaders within municipal sector. 

The Responsible Investing team conducts due diligence on external ESG research providers to ensure we are sourcing the highest quality and most accurate data, from vendors with strong: track records, analytical capabilities, overall ESG approach, data sources, coverage and update cycle.  This highest quality data are included in Nuveen’s RIDP and provide the foundation for Nuveen’s sector specific materiality map across 24 GICS sectors.

In 2019, the taxable fixed Income team assigned proprietary ESG ratings to over 1200 corporate issuers. The ratings take a sector neutral approach, demonstrating analyst conviction on material ESG issues. The ratings are integrated into investment platforms and included in all initial credit reviews, which are discussed at investment committee meetings.  The Responsible Investing team reviews the approach and provides feedback for continuous improvement. 

Additionally in 2019, we launched a proprietary data-driven municipal ESG scoring methodology for eight municipal sectors. The models were a result of a two year collaboration between the Responsible Investing team and the Municipal Credit research team to ensure the most material factors are incorporated. The teams review the models on an annual basis to asses needed enhancements. 

ESG-focused strategies are subject to certain positive/ best in class and norms-based ESG criteria. Our criteria for ESG-focused strategies takes a robust approach, significantly altering the investable universe to focus on true ESG leaders and to demonstrate ESG quality above the benchmark. For corporate issuers, the ESG evaluation process is conducted on an industry- specific basis and involves the identification of material key performance indicators, favouring companies with leadership relative to peers. Typically environmental assessment categories include climate change, natural resource and biodiversity, waste management and environmental opportunities. Social evaluation includes human capital and labor management, product safety and access to services and products. Governance assessment includes corporate governance practices and business ethics. Sovereign issuers are assessed on ESG risk management and performance across the following areas: natural resources conservation, climate change vulnerability, human capital development, access to basic services, and economic , financial and political governance.

For tax-exempt municipal ESG strategies, municipal issuers are eligible for the strategy by demonstrating ESG leadership as determined by our proprietary ESG scores. Municipal issuers are assessed on material factors relevant to the municipal sector. For example, hospitals are assessed on ESG outcomes such as quality and affordability of care, whereas water utilities are assessed on water quality and water stress risk. 

Nuveen’s proprietary impact framework for taxable fixed income strategies is aligned with the Green Bond Principles, requiring transparency and disclosure for labeled green bonds. We also encourage issuers of unlabeled green bonds and other thematic bonds classified under the impact framework to follow these best practices as much as possible. As market standards evolve, we will continue to engage issuers to increase transparency and disclosure over time.

We have been a pioneer in the green bond market since 2007. We also frequently invest in unlabeled green bonds, as long as they meet the environmental and/or social criteria for our proprietary impact framework. We are among the top 3 largest green bond investors in the market according to Bloomberg as of December 2019, holding over $3.4 billion in green bonds across the firm. Within the framework, the Renewable Energy & Climate Change and Natural Resources themes align well with both labeled and unlabeled green bond investment, while the Affordable Housing and Community & Economic Development themes align with social bond investment. In addition, we were represented on the initial Executive Committee of the Green Bond Principles, and have participated in standard-setting process of the Climate Bonds Initiative, S&P, and Moody's.

We require annual impact reporting for labelled green, social and sustainability bonds and encourage issuers of unlabelled thematic bonds to follow these best practices as much as possible. For unlabelled bonds, we may reach out to the issuer to seek post-investment disclosure of impact metrics aligned to the project type (e.g. for our renewable energy and climate change investments, we would request CO2 emissions avoided or renewable energy generation produced). Our approach recognizes that impact reporting methodologies are nascent for many thematic investments; therefore, we use engagement as a mechanism to help encourage best practice over the course of the investment.

We published our third impact report in 2019 for Nuveen’s taxable fixed income impact investment strategies.  Over the past three years we have advanced and expanded our impact reporting practices to include new information of interest to clients. For example, in this year reports we included impact metrics by geography. The impact summary is publicly available at: https://www.nuveen.com/en-us/thinking/impact-report. 

Note: the above reflects practices for impact investments in our taxable fixed income strategies given these strategies make up the majority of impact investment AUM in fixed income.

ESG analysis is integrated into portfolio construction and security weighting decisions, particularly to help determine relative value of investments with similar financial characteristics, but also where ESG may point to future risks or opportunities for the issuer or investment horizon. ESG data and internal and external ESG ratings are embedded within investment management platforms to allow for portfolio level analysis and decisions. In addition, ESG convictions are discussed in ongoing investment team meetings.