At Neuberger Berman, we integrate environmental, social and governance (ESG) factors throughout our fundamental credit research process. One important tool in our ESG process is direct and consistent engagement with issuers— not only to identify and better understand ESG risk factors, but also to set objectives with issuers that we believe will reduce credit risk and promote positive outcomes longer-term.
Our long-term relationships with companies, which involve multi-year dialogues led by investment teams rather than ESG specialists, make Neuberger Berman’s Non-Investment Grade Credit research team well-positioned to engage with OneMain Financial, a nonprime installment lender. In doing so, we followed some examples of best practice in engagement that are worth highlighting because they are broadly applicable:
- Set goals that are specific, can be achieved or failed, and are directly tied to the issuer’s core business or operations
- Enhance public disclosures for investors related to ESG efforts
- Tie the engagement to a common framework where possible—in this case, the U.N. Sustainable Development Goals (SDGs)
- Track progress over time
We find these aims achieve the most success with companies over time because management teams view them as tangible and achievable.
Our engagement efforts with OneMain were specifically focused on helping them develop and publish an ESG framework and strategy, which would reinforce the company’s commitment to servicing its communities and underserved customer populations responsibly. We engaged on best practices and the importance of providing an ESG framework focused on transparency, oversight and performance tracking for investors.
Ultimately, this dialogue contributed to the company establishing a social bond framework and issuing an inaugural social bond in the high yield market, in which Neuberger served as an anchor order. According to OneMain Financial Chief Risk Officer, Rich Tambor, “Neuberger Berman’s team provided thought leadership and guidance on standards and best practices and was invaluable in helping OneMain bring this framework to market.” We value the partnership with OneMain and their efforts to move this valuable social bond framework forward.
We look forward to additional progress when engaging with issuers and will continue to follow a similar approach — a deep dialogue oriented around specific goals, using common frameworks such as the SDGs where applicable and tracking progress over time. We believe that this framework will help us achieve many more successful outcomes in the future.