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2022 – 2023 Annual Stewardship Report: Aligning advocacy with actions
Resiliency in the face of disruption
A letter from Jose Minaya, Chief Executive Officer, Nuveen and Amy O'Brien, Global Head of Responsible Investing, Nuveen
2023 was an unprecedented year. Companies and investors were challenged by persistent inflation, rising interest rates, a banking crisis in the U.S., and supply chain issues that sparked fears of a global economic downturn. Conflict in Ukraine and the Middle East further heightened political tensions, and we saw a surge of technological innovation in generative artificial intelligence. As asset managers, we look to achieve resiliency in the face of disruption. We recognize the responsibility we have as stewards of our clients' capital, aiming to manage risk and deliver on focused outcomes for over $1 trillion** of their assets.
Despite these challenges, we remain dedicated and focused on advancing responsible investing practices, with preserving and enhancing long-term shareholder value at the center of our approach.
In this report, we recap our efforts to remain diligent in our ability to produce meaningful outcomes for our clients. Our approach is rooted in our fiduciary duty to maximize shareholder value, and we utilize our relationships and influence with companies through the lens of materiality, practicality and feasibility. We recognize that ‘impact’ in the investing world can take several forms, and we believe that transparency and accountability are necessary foundations for producing real-world outcomes.
Throughout all this disruption, we believe it is important to celebrate our successes and the progress made from our stewardship efforts. This past year, we engaged with over 400* companies on topics including:
- The global energy transition and climate risk
- Natural capital and biodiversity
- Diversity and non-discrimination
- Labor standards and human rights
- Product and consumer responsibilities
We also recognize the need to continue to adapt to an ever-evolving set of complex and interconnected global challenges. In 2023, we engaged companies and industry leaders on emerging issues such as responsible use of artificial intelligence, customer privacy and the importance of a “just transition” to a low-carbon economy. Engaging in these conversations can help ensure that our stewardship program adapts to rapidly changing market conditions.
Institutional investors can employ a variety of tactics to address systemic challenges in the real-world economy and identify investment opportunities that are most resilient to macroeconomic, regulatory and market dynamics. We utilize proprietary frameworks, along with global standards of transparency, to help our investment teams make more informed investment decisions.
We believe understanding where a company is on its journey and where it will find its next milestone is critical to calibrating where stewardship can be most effective.
At the company or portfolio level, distinguishing between the possibility for improvement and the desired end-state for stakeholders more clearly establishes what can be achieved through stewardship and what is required to be achieved through investment (re)allocation. It is unlikely that every company in a traditional portfolio will adopt a best practice or that a benchmark portfolio will organically achieve a certain stakeholder outcome. The associated investment returns as companies adopt best practices or achieve a particular impact will also vary along the way.
Our stewardship program is not designed to impose a set of one-size-fits-all practices for all companies. Stewardship is about resiliency in the face of disruption, partnering with companies on their sustainability journey, offering solutions, tracking progress and creating accountability.
In 2020, we developed a three-year escalation strategy that creates a roadmap for pushing companies that significantly lag versus peers and who have been unresponsive to engagement. This strategy has allowed us to connect more directly unaddressed environmental, social and governance concerns to our votes on shareholder proposals and company directors. We continue to evolve and iterate this escalation strategy in our Climate 2.0 program.
Beyond this, we developed a unique framework to organize the ESG information that our stewardship team is collecting from companies and clearly communicate positive outcomes without overstating what they achieve. Our framework buckets key performance indicators (KPIs) based on the objectives they service: transparency, accountability or impact. We have continued to find that distinguishing metrics and results based on where they fall in this framework adds value to our conversations with investee companies, gives us a strong foundation for regular evaluation of progress, and resonates with clients who want to understand the value of stewardship and seek credibility from asset managers.
And so, while disruption was ever-present throughout 2023, we remain encouraged by our ability to produce real-world outcomes for our clients over the long-term. Heading into 2024, we must remain resilient, and continue to evolve and adapt to an ever-changing world.
We are extremely thankful for the trust that our investors place in our process, and we look forward to serving you for years to come.
*Source: Nuveen, 01 July 2022 – 30 June 2023.
**As of June 30,2023.
Important information on risk
Past performance is no guarantee of future results. All investments carry a certain degree of risk, including the possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Certain products and services may not be available to all entities or persons. There is no guarantee that investment objectives will be achieved.
Responsible investing incorporates Environmental Social Governance (ESG) factors that may affect exposure to issuers, sectors, industries, limiting the type and number of investment opportunities available, which could result in excluding investments that perform well. ESG integration is the consideration of financially material ESG factors in support of portfolio management for actively managed strategies. Financial materiality of ESG factors varies by asset class and investment strategy. Applicability of ESG factors may differ across investment strategies. ESG factors are among many factors considered in evaluating an investment decision, and unless otherwise stated in the relevant offering memorandum or prospectus, do not alter the investment guidelines, strategy or objectives.