We believe that incorporating ESG factors into investment research, due diligence, portfolio construction and ongoing monitoring allows us to improve financial performance, mitigate risk, and create new investment opportunities. We are proud of the leadership role we have played for over five decades in RI and of our track record of achieving positive financial and non-financial client outcomes related to ESG practices. We believe that by driving transparency, innovation and global adoption of RI best practices across all asset classes, we have the opportunity to provide enduring benefits for portfolio companies, investors, society and our local and global communities.

Our clients expect us to be good stewards of their investments as we help them achieve financial well-being at all stages of life.  In order to fulfil our commitment to preserve financial, social and environmental value and support a sustainable macroeconomic system, we organize our practice around three key RI principles: (1) ESG integration, (2) engagement and (3) impact.

Impacts from climate change may include significant risks to global financial assets and economic growth. As investors, our primary objective is to mitigate investment risks stemming from climate change. We recognize that long-term investment performance depends on other well-functioning systems, including natural systems that provide clean water, abundant food, and many other resources to the global economy. These systems are threatened by global climate change, which in turn threatens economic growth and investment performance. Therefore, our focus on mitigating climate risk is grounded in this orientation.

Nuveen’s climate change strategy seeks to align our practices with the recommendations of the Task Force on Climate-Related Financial Disclosure, while recognizing our unique multi-asset class structure. Specific facets of the strategy include the development of an overarching risk classification framework, constructing internal climate metrics, and addressing data gaps through building upon industry vendors’ specific asset class strengths. 

Physical risks & Nuveen’s exposure:

Physical risks of climate change are observed in all geographical regions: the atmosphere and oceans are warming, sea levels are rising and weather patterns are changing (linked to the increasing intensity and frequency of storm surges and hurricanes).  These changes can have a strong adverse impact on infrastructure, agricultural yields, quality of life, public health and economic growth. Emerging markets are likely to be more vulnerable to these impacts than developed markets.

Physical risks may affect Nuveen clients’ public & private investments, with exposure concentrated in two areas: 1) private investments in agriculture, timber, real estate, energy and infrastructure, and to a lesser extent, 2) public equity and debt investments in the utilities, energy, food and beverage, apparel, metals/mining, industrials and basic materials industries. 

Transition risks & Nuveen’s exposure:

Transition risks of climate change stem from the transition to a low carbon economy via technological innovation (increasing viability of renewable energy, energy efficiency, energy storage, and alternative and lower-carbon fuels), environmental regulation (cap and trade/carbon tax, fuel efficiency standards, etc.), and market forces (changes in fossil fuel commodity prices and consumer preferences).

Transition risk may affect Nuveen clients’ public & private investments, with exposure concentrated in fossil fuel and energy-intensive sectors. An abrupt or disorderly low carbon transition is expected to increase the transition risk facing these sectors.

Factoring climate risks into investment strategies:

Nuveen factors physical and transition risks of climate change into investment strategies in a variety of ways.  Individual investment teams identify and manage risks that apply to the specific assets that they oversee.  Nuveen’s Responsible Investing professionals work closely with investment teams in each asset class to integrate ESG considerations, including climate risk, into the fundamental investment process. For example, investment teams receive specialized training and have widespread access to carbon and climate data for their asset class.

In real assets, Nuveen emphasizes direct investments in climate change adaptation/mitigation projects like renewable energy and desalination and screens. In public markets, Nuveen is among the largest global investors in green bonds, and has launched over 10 low carbon mutual funds and ETFs.

Nuveen participates in TIAA’s Emerging Risk’s Working Group, under which climate risk was initially identified and tracked.  The Emerging Risk Working Group developed the following timescale rubric:

• Short-term: 1-4 years
• Intermediate: 3-6 years
• Mid-term 6-10 years
• Long-term: >10 years

We evaluated the timescale, level of importance, impact, and likelihood of several aspects of climate risk, including carbon-intensive assets and the physical, macroeconomic, and water impacts from climate change. While timescales can vary significantly based on a number of factors, we believe that carbon-intensive assets may face more short- and intermediate-term risks than other assets. However, the likelihood and impact of these risks is uncertain depending on the speed and nature of the low carbon transition.  Meanwhile, we expect physical risks to materialize more so in the long term, with higher likelihood due to the physical effects of climate change already projected to occur.

In addition to these initial views developed through the emerging risks process, we plan to conduct additional analysis on the timescale, likelihood, and impact of these risks as part of formally embedding climate risk into our enterprise risk management process. For certain asset classes with less liquidity and longer hold periods (such as real estate), Nuveen already conducts more detailed analysis over a 30 year time horizon.

The Climate Risk Task Force (the “CRTF”) is an internal working group established to develop an organization-wide strategy and oversee the management of risks associated with climate change that may arise across the Enterprise and its investment specialists. The task force’s responsibilities include but are not limited to:

• Coordinate board-level communication on climate change risk topics
• Recommend new climate risk management processes to monitor the exposure of Nuveen investment portfolios
• Review and recommend potential climate risk controls

Environmental issues have always figured prominently in TIAA’s Policy Statement on Responsible Investing.  Prior to the establishment of the CRTF, in early 2017, TIAA’s Executive Committee approved a new Climate Change Statement of Principles, which provided further clarity and guidance across the company on this important cross-cutting issue. Language from the statement was later integrated into the Climate Change section of the 7th edition of the TIAA Policy Statement on Responsible Investing published in March 2019.  The full Policy Statement can found online at: https://www.tiaa.org/public/pdf/ri_policy.pdf. 

We seek to avoid or mitigate conflicts of interest that may arise in the normal course of our activities. We do this in several ways:

(1) Through the issuance of policies;

(2) Through the training of our employees;

(3) Through the implementation of controls; and

(4) Through the monitoring of activity that may present conflict such as employee personal trading and conduct, employee/firm and/or client and portfolio company relationships.

Information relating to our policies on conflicts of interest, voting client securities and other practices are outlined in our affiliates’ respective Form ADV, Part 2A which is made available to the public.