Similar to corporate (financial) ESG analysis, taxable fixed income analysts employ a fundamental bottoms up approach to their credit research process that has always implicitly considered material ESG information as a qualitative input to their research. In 2019, Nuveen’s taxable fixed Income team assigned proprietary ESG ratings to over 1200 corporate issuers, of which approximately 81% were non-financial corporates. Like with assessing corporate financial, analysts use Nuveen’s RIDP to assess material issues for non-financial sectors. Material issues considered to assign corporate (non-financial) ratings differed by sector. For example, utilities analysts considered climate change and carbon emissions, natural resources, health and safety and corporate governance whereas for media analysts evaluated energy use, data privacy and security, human capital development and business ethics. Proprietary ESG ratings are embedded in investment research and trading platforms.
For investment specialists investing in private non-financial companies, credit teams use a proprietary ESG framework that highlights material factors by sector. Where information is not available in the public domain, investment teams may engage with the issuer or third parties (underwriter, sponsor or consultant) to glean additional information.
For real estate debt, real estate debt: ESG is integrated into the investment process through the selection of target markets taking into account anticipated demographic shifts, potential social disruptors in a city or region, climate risks and any other high risk factors that may result in decreased value of or demand for real estate assets in the city or region.