ESG Fixed Income Engagement Report

Developed Markets Corporate Credit

Our engagement process, key themes and observations, data summarizing our engagement activities and relevant case studies.

We believe that material Environmental, Social and Governance (ESG) factors have a meaningful impact on credit quality and therefore must be an important component of the credit research process. Additionally, engaging with issuers on ESG topics can improve the risk profiles of portfolios over time and aligns with our firm-wide commitment across asset classes to ESG integration and engagement. As a result, Neuberger Berman’s Developed Markets Corporate Credit research team has engaged on approximately 670 ESG issues from April 1, 2017 to September 30, 2018 as we continue to lead efforts to increase issuer ESG awareness within our markets.

Importantly, our credit research team is directly leading our engagement efforts with issuers across the high yield, leveraged loan and investment grade credit markets. Our efforts extend beyond the parts of the market historically viewed as easiest to access, as our engagements include privately owned companies, issuers not rated by third party ESG providers and issuers not typically targeted for ESG engagement. We closely track our engagement activities, measure progress and report internally on our current priorities and initiatives. In this report, summary information on our efforts includes an overview of our engagement process, key themes and observations, data summarizing our engagement activities and relevant case studies. We plan to report on our engagement activities on a semiannual basis going forward in order to provide increased transparency to our investors.

ESG Issues Engaged upon with Developed Markets Corporate Credit Issuers

April 1, 2017 - September 30, 2018

This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

This material may include estimates, outlooks, projections and other “forward-looking statements.” Due to a variety of factors, actual events or market behavior may differ significantly from any views expressed. Investing entails risks, including possible loss of principal. Indexes are unmanaged and are not available for direct investment. The use of tools cannot guarantee performance. Diversification does not guarantee profit or protect against loss in declining markets. Past performance is no guarantee of future results.

Hypothetical Backtested Performance Disclosures

The hypothetical performance results included in this material are for a back-tested model portfolio and are shown for illustrative purposes only. Neuberger Berman calculated the hypothetical results by running a model portfolio on a back-tested basis using the methodology described herein. The results do not represent the performance of any Neuberger Berman managed account or product and do not reflect the fees and expenses associated with managing a portfolio.

The model risk parity strategy includes bonds, equities and commodities, with volatility contributions equally weighted based on two-year trailing realized volatility, and a target portfolio volatility of 10% annualized; bonds are represented by the Ibbotson U.S. Intermediate-Term Government Bond Index, equities by the S&P500 Index and commodities by the GSCI Commodity Index after 1970, and commodity futures data from Bloomberg pre-1970.

There may be material differences between the hypothetical back-tested performance results and actual results achieved by actual accounts. Back-tested model performance is hypothetical and does not represent the performance of actual accounts. Hypothetical performance has certain inherent limitations. Unlike actual investment performance, hypothetical results do not represent actual trading and accordingly the performance results may have under- or over-compensated for the impact, if any, that certain economic or other market factors, such as lack of liquidity or price fluctuations, might have had on the investment decision-making process or results if assets were actually being managed. Hypothetical performance may also not accurately reflect the impact, if any, of other material economic and market factors, or the impact of financial risk and the ability to withstand losses. Hypothetical performance results are also subject to the fact that they are generally designed with the benefit of hindsight. As a result, the back-tested models theoretically may be changed from time to time to obtain more favorable performance results. In addition, the results are based, in part, on hypothetical assumptions. Certain of the assumptions have been made for modeling purposes and may not have been realized in the actual management of accounts. No representation or warranty is made as to the reasonableness of the assumptions made or that all assumptions used in achieving the hypothetical results have been stated or fully considered. Changes in the model assumptions may have a material impact on the hypothetical returns presented. There are frequently material differences between hypothetical performance results and actual results achieved by any investment strategy. Neuberger Berman did not manage any accounts in this manner reflected in the models during the backtested time periods shown.

The GSCI Commodity Index, published by Standard & Poor’s, is a world production-weighted index of the most liquid futures contracts in 24 commodity sectors.

Ibbotson U.S. Intermediate-Term Government Bond Index is a one-bond index that tracks the total return of the shortest non-callable bond with a maturity of not less than five years for one calendar year, before choosing a new bond on the same criteria.

The S&P500 Index is a float-adjusted, market capitalization-weighted index of the 500 largest companies listed on the New York Stock Exchange or the Nasdaq Stock Market.

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