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Nuveen knows: big data
Seeing investments in an entirely new way: How ESG data may help enhance long-term value and manage downside risk
Overview from Amy O’Brien and Mike Perry
By applying big data to big investments with an ESG lens, we can see potential advantages for both performance and risk management.
For nearly five decades, we have been a leader in responsible investing, a discipline that incorporates the consideration of environmental, social and governance (“ESG”) factors into investment research, due diligence, portfolio construction and ongoing monitoring. We have believed that ESG information provides an additional lens to assess company and issuer performance, and we actively engage and influence companies and issuers in which we invest to make ESG issues a key consideration when running their businesses.
Now, as ESG data begins to mature and has a longer track record, we’re better able to see that our long-held premise is sound: ESG factors provide an additional lens to assess company and/ or issuer performance that may enhance long-term value or help manage downside risk.
Big data is shining a brighter light on what has been previously viewed as ambiguous information. And data of every kind is allowing us to see and measure in all aspects of our lives — including how we make investment decisions. Our ability to curate vast amounts of ESG data is helping us see investment opportunities in an entirely new light.
In fact, we just launched Nuveen’s RI Data Platform — one of the first big data ESG technology platforms to enable better informed investment decisions that leverage our nearly 50 years of intellectual capital.
By leveraging the power of big data, our RI Data Platform processes a vast amount of structured and unstructured ESG data sources that can impact the performance of investment opportunities. In the following pages, our investment professionals share their views on big-data analysis and insights as they affect:
As the old adage goes, “you cannot manage what you cannot measure.” Traditional valuation models like discounted cash flow can help assess financial risks, but they often fail to capture the complete picture. Intangible assets—which are impacted by financially material ESG risks and opportunities—now compose as much as 87% of the market value of the S&P 500.1 Using alternative data sets such as material ESG factors allows us to detect otherwise underappreciated opportunities for increasing alpha, as well as underestimated risks.
Public fixed income
Big data is also revolutionizing how we assess opportunities in the municipal bond market by uncovering relevant ESG metrics that can help sharpen our view of risk. Two seemingly identical cities with the same credit quality may suddenly reveal stark differences when we apply our proprietary analysis using FBI crime data, EPA climate data, housing affordability data and more. Our sophisticated head-to-head comparisons draw on extensive data sources to identify ESG leaders who have the potential to deliver sustainable value relative to their competitor groups.
Real assets/private markets
When it comes to investing in real assets—farmland, timber, energy and infrastructure—sustainability is essential for assessing risk and preserving long-term value. Where does big data come in? As just one example, we engage technology and data analysis in our due diligence for land purchases. We combine data from satellite imagery to understand historical land use patterns, while matching it to government global positioning system data used to substantiate land claims. This is particularly important in regions where we must adhere to regulatory frameworks that promote zero deforestation and sustainable agriculture.
Improving the sustainability performance of real estate may improve the attractiveness of the asset, helps keep service charges lower and reduces operational costs for occupiers. Energy efficiency is a critical factor, which is why we seek to reduce the energy intensity of our real estate equity portfolio by 30% by 2030. Big-data analysis techniques are assisting us with this effort by helping us measure energy efficiency across a broad range of properties. We also are able to see relative performance of assets when it comes to water usage and other factors.
As investors, we are champions of the long-term perspective — and that perspective must include analysis of an entity’s ESG practices. Nuveen believes that our responsible investing principles may provide enduring benefits for our investors, our communities and the planet.
Risks and other important considerations
Investing involves risk; principal loss is possible. There is no guarantee an investment’s objectives will be achieved. An investment which includes only holdings deemed consistent with applicable Environmental Social Governance (ESG) guidelines may result in available investments that are more limited than those that do not apply such guidelines. ESG criteria risk is the risk that because the criteria excludes securities of certain issuers for nonfinancial reasons, an investment may forgo some market opportunities available to those that don’t use these criteria.
The investment advisory services, strategies and expertise of TIAA Investments, a division of Nuveen, are provided by Teachers Advisors, LLC, and TIAACREF Investment Management, LLC.
Nuveen Real Estate is a real estate investment management holding company owned by Teachers Insurance and Annuity Association of America (TIAA).
Nuveen Real Estate securities products distributed in North America are advised by UK regulated subsidiaries or Nuveen Alternatives Advisors LLC a registered investment advisor and wholly owned subsidiary of TIAA, and distributed by Nuveen Securities, LLC, member FINRA.
This material is provided for informational or educational purposes only and does not constitute a solicitation of any securities in any jurisdiction in which such solicitation is unlawful or to any person to whom it is unlawful. Moreover, it neither constitutes an offer to enter into an investment agreement with the recipient of this document nor an invitation to respond to it by making an offer to enter into an investment agreement.
This material may contain “forward-looking” information that is not purely historical in nature. Such information may include projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition. Moreover, certain historical performance information of other investment vehicles or composite accounts managed by Nuveen may be included in this material and such performance information is presented by way of example only. No representation is made that the performance presented will be achieved, or that every assumption made in achieving, calculating or presenting either the forward-looking information or the historical performance information herein has been considered or stated in preparing this material. Any changes to assumptions that may have been made in preparing this material could have a material impact on the investment returns that are presented herein by way of example.
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Nuveen to be reliable, and not necessarily all-inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecasts made will come to pass. Company name is only for explanatory purposes and does not constitute as investment advice and is subject to change. Any investments named within this material may not necessarily be held in any funds/accounts managed by Nuveen. Reliance upon information in this material is at the sole discretion of the reader. Views of the author may not necessarily reflect the view s of Nuveen as a whole or any part thereof.
Past performance is not a guide to future performance. Investment involves risk, including loss of principal. The value of investments and the income from them can fall as well as rise and is not guaranteed. Changes in the rates of exchange between currencies may cause the value of investments to fluctuate.
This information does not constitute investment research as defined under MiFID.