NEI has a comprehensive process for monitoring portfolio companies. All portfolio companies are monitored for Headline Risk through news and ESG controversies services. As part of this process, the NEI ESG Services Team identifies, evaluates and monitors stories that are published in credible media sources and portray a company in a negative manner. Observed Headline Risks are categorized for type and severity, and required actions are determined.
In cases where an incident identified falls outside the range of issues normally captured by a company evaluation and is not being addressed by our Corporate Engagement Program, a Management Breach Investigation may be conducted. We define a Management Breach as a significant transgression of management ethics or a situation indicating a corporate culture that is inconsistent with our responsible investment thesis. While a Headline Risk report records and assesses controversial or negative media coverage about a company, the Management Breach process examines the fundamentals of an incident to determine if a company has violated our Baseline Expectations. A Management Breach determination results in one of three potential outcomes: enhanced monitoring, engagement or divestment.
In addition, we have developed and implemented an internal due diligence process to ensure that our investment processes comply with the OECD's guidance on Responsible Business Conduct for Institutional Investors, which outlines the expectations for investors in regard to undertaking proper due diligence related to the OECD Guidelines for Multinational Enterprises. This process applies to all screened and non-screened portfolios. A particular concern for us is to ensure that none of our portfolio companies are engaging in any activities that cause or contribute to negative human rights impacts.