Neuberger Berman has completed the implementation of the main recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosure (TCFD).
The firm has implemented a new resource to analyse potential climate-related risk. It has completed quantifying the potential value-at-risk from climate change to all the public equity and corporate-issuer fixed income holdings in the firm's US mutual funds and international Ucits range, and will expand this analysis to holdings in other client portfolios in the future.
Using scenarios developed to align with the commitments of the Paris Agreement on climate change, Neuberger Berman's portfolio managers have analysed and reviewed which securities are likely to financially benefit or suffer from changes in weather patterns, regulation or technology shifts. The firm's board of directors has been charged with oversight of climate risk and changes have been made to the way the firm manages climate risk in its own operations.
By systematically analysing the potential investment implications of climate change across portfolios, the firm has another resource to target long-term value creation for its clients. The firm is running a range of scenarios, including those aligned with a 2° Celsius and a 1.5° Celsius transition. The results will allow analysts to focus on engaging with companies and management teams who appear to be particularly at risk. This engagement will continue to provide bottom-up insights to further enhance our understanding of climate risk.
"As the world transitions to a lower carbon economy, it is important for us to understand how best to position our portfolios to serve our clients' objectives," said Jonathan Bailey, head of ESG investing at Neuberger Berman. "No scenario will be perfectly accurate, but by systematically modelling climate-related risk and opportunity, our portfolio managers are better informed about how their portfolios are positioned. They can then choose how best to apply all the tools of active management, whether that is to engage or ultimately to sell a security when it no longer offers an attractive risk-adjusted potential return."
In line with the best-in-class governance recommendations of the TCFD, Neuberger Berman's board has taken overall responsibility for managing climate risk for the firm, as part of its broader oversight of enterprise risk. Chief Officers for Investment (CIOs), Risk (CROs), and Operations (COOs) will oversee the climate-related corporate strategy as part of the entire firm's overall management, working alongside the firm's ESG investing team and portfolio managers. The firm's climate-related corporate strategy provides further details on the approach.