JUNE 2023
NEUBERGER BERMAN
Annual Report
Neuberger Berman, founded in 1939, is a private, independent, employee-owned
investment manager. The firm manages a range of strategies—including equity, fixed
income, quantitative and multi-asset class, private equity, real estate and hedge funds—
on behalf of institutions, advisors and individual investors globally. Neuberger Berman’s
investment philosophy is founded on active management, engaged ownership and
fundamental research, including industry-leading research into material environmental,
social and governance factors. Neuberger Berman is a PRI Leader, a designation awarded
to fewer than 1% of investment firms. With offices in 26 countries, the firm’s diverse
team has over 2,700 professionals. For nine consecutive years, Neuberger Berman has
been named first or second in Pensions & Investment’s Best Places to Work in Money
2
Management survey (among those with 1,000 employees or more). The firm manages
$436 billion in client assets as of March 31, 2023. For more information, please visit our
website at www.nb.com.
TABLE OF CONTENTS
A MESSAGE FROM OUR CEO
NEUBERGER BERMAN AT A GLANCE
OUR INVESTMENT PLATFORM
A CULTURE THAT DRIVES US
Corporate Social Responsibility
Equity, Inclusion and Diversity
ENGAGEMENT AND PROXY VOTING
1
3
11
17
18
22
25
ESG INVESTING
GETTING TO KNOW US
2022 Firm Stakeholder Metrics
2022 Financial Highlights
VOICE OF THE CLIENT
Merrill Lynch
The Brunel Pension Partnership
AIA Group
39
49
50
54
14
36
46
A Message
from Our CEO
1
GEORGE H. WALKER
Chairman and Chief Executive Officer
Last year was a tough one for asset managers. It began with the industry scrambling to remove
Russian securities from emerging markets portfolios, as Russia’s invasion of Ukraine brought
war to Europe and sanctions against many issuers. It ended with several large real estate funds
having to respond to increased liquidity demands as investors started stampeding for the exits.
And the months between brought many other challenges.
Supply chains still creaking from the COVID-19 pandemic were hit
by further trade disruptions from the war in Ukraine and growing
U.S.-China tensions. Mixed in with the hangover from pandemic-
era fiscal and monetary-policy largesse, that sent global inflation
soaring. Central banks responded by bringing a decade of “free
money” to an abrupt—but overdue—end. When the brakes are
slammed, something often goes through the front windshield, and
this was no exception. A crisis in liability-driven investment vehicles
for U.K. pension plans, driven by long-absent “bond vigilantes”
pouncing on reckless economic policy announcements, took down
a Prime Minister after just 44 days in office. Moving into 2023, we
saw several regional banks in the crosshairs, especially those that
combined high concentrations of uninsured deposits with long-
duration assets, now underwater given the rise in rates. Challenges
in office real estate appear to loom next, especially for those real
estate businesses with high leverage and pending maturities.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 2
All the while, the impact of climate change continued to intensify. Record
summer heat waves sparked devastating wildfires across Europe. Floods
in Pakistan, caused by melting glaciers and torrential monsoon rains,
covered a third of the country, killing almost 1,800 people and leaving
over two million homeless. And while these things were happening, the
investment industry’s approach to environmental, social and governance
(ESG) issues was becoming a political football.
At the end of it all, the MSCI All Country World Index of equities was
down 18% and the Bloomberg Global Aggregate Index of investment
grade bonds was down 16%, leaving investors virtually nowhere to hide.
The S&P Composite 1500 Asset Management and Custody Banks Index,
including many of our public competitors, after declining more than a third
by mid-October, finished the year down 22%. It was a tough year.
I wish I could be the bearer of better news, but we do not think the
recovery early in 2023 will persist. While we expect inflation to abate
from its recent peak of 9.1%, we believe it will prove to be sticky after
it declines below 4%. We anticipate resilient labor markets and a lack of
sufficient political will to create the necessary rise in unemployment to
achieve inflation targets quickly, and we see structural forces, including
modest “deglobalization,” keeping average inflation higher than it has
been over the past 30 years. That would mean higher rates for longer.
As a result, fixed income is attractive again after a long period in the
low-yield wilderness. Higher rates have also made equities cheaper—but
perhaps not cheap enough, as we remain concerned that current index
levels do not reflect the cyclical earnings downturn that seems likely as
tighter monetary policy eats into the wider economy over the coming year.
Offering an Investment Toolkit for
All Weather
How are our clients responding to these cross-currents?
First and foremost, they are revisiting their strategic asset allocation, aware
how profoundly the investment environment changed during 2022. If they
are under 40, this may be the first time they’ve ever seen fixed income as
a genuinely attractive asset class, but also the first time they’ve seen such
a sustained rise in equity-bond correlation. It’s certainly the first time they’ll
have seen double-digit inflation in certain developed countries. We’ve been
there to help them think through the critical questions raised: How should
we think about fixed income’s return and diversification roles? Should
we rethink the sizing of our alternatives allocation? How important is an
inflation buffer, and how do we go about building one?
When conditions change so profoundly, it’s important to keep our eyes on
the horizon and not be either backward-looking or caught up in market
noise or performance-chasing. One of the reasons we enjoy such a high
retention rate among private clients is that we bring the same sophisticated,
disciplined strategic asset allocation to their investment programs as we
bring to our leading institutional clients.
The fixed income and credit landscape was the one most transformed
in 2022, and one of our great strengths is the breadth of our expertise
across these markets. We offer in-depth coverage of everything from global
government bonds to currencies, asset-backed securities to corporate
hybrids, municipals to mortgages, public high yield bonds and private
loans—and we have an integrated process for bringing them all together
in flexible, multi-asset portfolios. Many of these asset classes—government
bonds, agency mortgages, high-quality municipal bonds and short-duration
investment grade credit for example—now appear to be attractively priced
and useful in portfolios again, having been neglected by investors for more
than a decade because of their low yields. Far from neglecting them, we
continued to invest in our capabilities in these areas, and that institutional
commitment is now paying off.
With higher rates and lower medium-term return estimates for stocks, a
thoughtfully diversified multi-sector bond portfolio is a real competitor
against equity for portfolio allocations, especially if an investor can consider
less-liquid markets (such as leveraged loans) or illiquid markets (such as
private direct lending). Having said that, idiosyncratic credit and default
risks are rising and, while rates and spreads are unlikely to be as volatile
this year as they were in 2022, we remain in a quite uncertain environment
of potential stagflation and fluid monetary policy. Rates volatility isn’t
expected to disappear completely, credit selection is likely to become a more
important determinant of performance, and we expect the opportunity set
for sector rotation to remain rich. Managing fixed income portfolios is now
a very different challenge than it was in the quantitative-easing, zero-rates,
near-zero-default era, but it remains a challenge, nonetheless. A flexible
approach to the full spectrum of opportunity is more likely to see relative
value and mispriced risks, and have the ability to move nimbly among them.
Higher rates will cause investors to rethink the kind of equity exposure
they want. Over the past decade of sluggish economic growth and ever-
declining rates, many clients sought growth and long duration. During 2022,
however, many of our clients wanted to rotate into value, both to shorten
their duration and to lower their portfolio multiples. They found an excellent
candidate in our U.S. Large Cap Value strategy, which has been steadily
doing its thing for well over a decade. By standing behind Eli Salzmann
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 NEUBERGER BERMAN AT A GLANCE
$427
BILLION
Assets Under Management
Around the Globe
>2,700
CREDIT
>4,000
EQUITY
Proprietary
NB ESG Quotient Ratings2
100%
Independent,
Employee-owned
Structure
Top scores for ESG integration
across all asset classes awarded
by UN-Supported Principles
for Responsible Investment (PRI)
Pension & Investment’s
“Best Places to Work in Money Management” Survey
Ranked 1st or 2nd
every year from
2014 – 2022
1
2022
Barron’s
2022 Best Fund Family Rankings
1
2
3
U.S. Equity
Mixed Equity
Overall
Disclosed votes in advance of
63 shareholder meetings in 2022
North American asset manager
to secure a sustainability-linked
credit facility
Large asset manager to provide
proxy vote disclosure well in
advance of company meetings
1 2021 data excludes the Dyal Capital Partners business, which Neuberger Berman contributed toward creating Blue Owl in May 2021.
2 As of March 31, 2023.
1989
First dedicated
sustainable
investing strategy
2%1
Revenue
Growth
-3%1
Adjusted
EBITDA Growth
3
2,600+
Employees Worldwide
724
Investment Professionals
(76 net added in 2022)
26
Offices in Countries
Worldwide
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 96%
Annualized retention rate of senior investment
professionals at MD and SVP level since becoming
an independent company in 2009
4
and his team through the many lean years for value strategies, the firm
enabled him to stick to his style and avoid the temptation of “growth by
stealth”—resulting in the rare combination of an enviable track record and
a purity of exposure that investors were looking for as the style rotation
gathered pace last year.
Our valuation sensitivity, rigorous discipline and experienced portfolio
management teams led us to strong performance across the equity
platform. We were pleased to be ranked #1 in U.S. Equities in Barron’s
magazine’s annual competition, amongst all U.S. mutual fund families.1 We
exist to deliver for clients and, despite the gloom in the markets, it’s thrilling
for us to outperform so many peers we admire. Likewise, we were pleased to
be ranked far ahead of the pack and among other large, employee-owned,
long-term-oriented and engagement-focused firms in Institutional Investor’s
inaugural list of “America’s Top Asset Management Firms,” where 400
asset managers were graded, not by clients, but by company management
teams: how well does the asset management firm know their company,
their industry and their unique capital allocation processes? Insight and
engagement won’t always lead to near-term outperformance, but we
believe that in the fullness of time, it yields the best results for clients.
In private markets, several different dynamics are at play.
Many private clients are making their first commitments to private
markets—perhaps driven by the potential for higher and/or less volatile
returns than public market counterparts or a recognition of the growing
importance of private companies in the global economy. During 2022,
Neuberger Berman put itself at the forefront of efforts to democratize
private markets with the launch of vehicles available to broader segments
of the investing public across several jurisdictions.
Among institutional investors, the leading surveys reveal some definite
trends. While it’s still the case that more investors say they expect to
increase their allocations than decrease them during 2023, there has been
1 Please see page 61 for important information about the Barron’s rankings.
a notable rise in the proportion planning to decrease exposures, or saying
they are above their allocation limits. The most commonly cited reason for
slowing, stopping or reversing allocations is the “denominator effect”,
whereby a decline in overall portfolio value, due mainly to re-pricing of
public-market assets, raises the proportion allocated to private markets.
The big exceptions to this trend of slowing allocations are private equity
secondaries and private debt, where many investors are initiating or adding
investments, especially in direct lending and special situations.
The underlying picture is increasingly clear: investors are finding it difficult
to commit to private markets just as many leading General Partners are
seeking to raise new, larger funds; and while that will make for a tougher
fundraising environment in the near term, it also creates abundant
opportunity for liquidity providers.
For example, if funds end up smaller, there are likely to be more co-investment
opportunities, and fewer Limited Partners able to take them on—our team
has already seen an uptick in offers. Private equity secondaries has become
a buyer’s market as both Limited Partners and General Partners seek
liquidity to manage their portfolios. Over the summer of 2022, we held
the final close for our fifth NB Secondary Opportunities Fund, at $4.9bn.
The raise exceeded our target, reflecting strong investor appetite for both
traditional LP- and GP-led secondaries, and the expectation that secondary
investors may benefit from an increasingly illiquid environment. We think
the growth in GP-led secondaries is particularly interesting and, with over
$100 bn under management in private markets across the capital structure,
a seat on over 300 Limited Partner Advisory Committees (LPACs) and 28
investment professionals dedicated to secondaries, we have the ability to
step into those situations quickly, grounded in years—often decades—of
experience with leading private equity firms.
Higher rates, tighter credit conditions and banks under stress are also
pushing loan terms and yields in favor of private direct lenders. Floating
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 5
rates and a position high in capital structures can also help buffer against
the two major macroeconomic risks of persistently high rates and declining
corporate earnings. That helps explain why NB Private Debt Fund IV raised
$8.1bn, inclusive of leverage. Investors also see an opportunity in special
situations and capital solutions in this environment, and we agree—we see
very attractive yields available for providing preferred equity to high-quality,
fast-growing companies that already have substantial floating-rate debt,
for example. With conditions backing private credit this year, we also expect
more demand for our solutions that seamlessly blend public and private
fixed income together—which was one of the many reasons we hired
Louay Mikdashi as our Head of Multi-Sector Private Credit in June 2022,
with a brief to partner closely with senior leaders across our Fixed Income
and Alternatives teams to manage strategies drawing on the full range of
NB’s private debt capabilities.2
Where are clients most anxious? Their commercial real estate allocations
would be high on the list. They see important sectors like city-center offices
enduring a multi-year perfect storm, now topped with rising interest rates
on debt financing, rising loan-to-value ratios as property prices decline,
rising vacancies (and lower utilization as work-from-home endures at many
firms), and growing trouble getting financing from the many U.S. regional
banks. Unlike in the high-yield and loan markets, where the maturities in
the coming three years are quite modest, around $1tn of real estate debt is
coming due in the next 18 months.
Again, when they turn to their exposures via NB, we hope they are not just
reassured, but bullish. In both public-listed real estate and our Almanac
private investing platform, we have long favored high-quality operators
who own assets in sectors that benefit from the dynamics that are hurting
offices and retail: flexible office spaces and residential property in second-
or third-tier cities and towns; the cellphone towers and datacenters critical
to the 5G rollout; and the warehouses and urban “infill” sites that support
e-commerce. We believe that these exposures, together with a longstanding
preference for conservative capital structures, put our portfolios in a
relatively strong position, not only to weather the current downturn, but
to find opportunity in it. Value is already evident in listed real estate; it
2 Subject to compliance with NB’s Information Barrier Policy.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 is starting to show up in private real estate
secondaries; and as we move through 2023, we
think that value will make its way into broader
private market pricing, too. The terrific re-up
rate for Almanac’s latest fund, Almanac Realty
Securities IX, indicates that clients appreciate
our philosophy and recognize this opportunity.
Relying on Our Strengths to
Sustain Investment Through
Volatile Times
All of this suggests that tough times in the
economy are also often times of opportunity. So
how is our industry responding to the economic
headwinds of 2022 – 23, and how is it preparing
for these opportunities?
Most firms have responded to reduced revenues
(and typically net outflows from clients) with
cuts in headcount, office footprint, research data
costs, travel and compensation, likely spread
across 2022 and 2023.
NB has chosen a different path, a luxury afforded
by two fundamental attributes.
Client support, evident in flows through both
2021 and 2022, meant that our revenues grew by
2% last year, despite the big drops in equity and
bond markets.3 Making the top three in Barron’s
2022 Best Fund Family Rankings—and taking
the top spot in the key U.S. Equity category—is
one indicator of why clients continue to reward
us with that valuable support.
Our ownership structure is important, too. With
no corporate parent and no external shareholder,
we can focus on the long term, building the
capabilities required to meet client objectives,
despite the tougher market conditions. We
invested in our people and in research and data
6
“ Work should be stimulating
and fun, and you should
have fun every day, wherever
you are. I have tried to share
this idea with my partners
and with all our employees.
I believe our success has
something to do with that.”
ROY NEUBERGER
Founder of Neuberger Berman
science in 2022, and continue to do so in 2023,
as we believe those investments will enable us
to outperform peers in the years ahead. It is why
we exist.
Our headcount grew by 248 people, or 10%,
globally during 2022, and total compensation
and benefits increased. Investing in the best
people means investing in the things that keep
the best people onboard, so we were pleased to
be ranked #1 again in the Pensions & Investments
“Best Places to Work in Money Management”
Survey. “Work should be stimulating and fun,”
as our founder Roy Neuberger once put it. “I
have tried to share this idea with my partners and
with all our employees, and I believe our success
has something to do with that.” We continue
to follow his lead. We added 70 colleagues to
our employee ownership group in 2022 and,
as we turned the corner into 2023, we had 408
buyers and 19 sellers of NB equity among non-
retirees—a vote of appreciation and confidence
in the firm’s ownership structure.
Standing for Active Investing
and Engaged Ownership
Unfortunately, among those looking into our
industry from the outside, engaged owners are
not always as welcome as they should be for
our system to function well.
Amidst the challenging backdrop of 2022
and upcoming political contests, it was not
surprising that the noise in the system was
unusually loud and that sound bites ruled the
day—or that the loudest sound bites came
from the debate around ESG (or rather, the
various issues that get projected onto “ESG”).
On one side of this debate, a senior elected
official called ESG “part of Satan’s plan,” a
3 2021 data excludes the Dyal Capital Partners business, which Neuberger Berman contributed toward creating Blue Owl in May 2021.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 preview of rhetoric we’ll hear more of as election season approaches.
On the other side, we’ve seen television advertisements suggesting that
investment managers that are not making public commitments to net zero
are causing an imminent climate catastrophe.
decision-making, capital allocation and financial risk management, made
even more complex by the dynamic economic, regulatory and physical
environment. Aren’t they exactly the kind of challenges where investors
expect their active managers to engage?
A black-and-white debate may be good TV or politics, but the real world
is more complicated. Whether it is regarded as good or bad, the impact
of ESG, as practiced by leading active investors, is materially overstated in
this debate. That suggests to me the terminology is no longer helpful, and
new labels may be required to describe what asset managers actually do.
Take climate change. It is ultimately up to governments to determine
climate policy and address externalities. Our job as investment managers
is to try to understand how our changing climate and the direction
of policy will affect the economy and the companies in our clients’
portfolios, and respond accordingly. In that way, climate is no different
than corporate tax policy: there may be a range of opinions about what
tax policy ought to be, but that is ultimately for governments to determine.
Our responsibility is to understand how changes might affect corporate
profits and the value of securities. Through that lens, it is clear to us that
investors need to focus on the likely path and speed of the transition to
a lower-emissions economy. The International Environment Agency’s Net
Zero scenario still has over 60% of global energy supply coming from
natural gas, oil and coal in 2030. Deploying cost-competitive renewables
will take time and require substantial capital expenditures. Fossil fuel
companies will have a vital continued role as that happens. That means
many investors will seek to include these businesses in their portfolios,
whether for financial reasons or because they believe it’s the best way to
ensure their capital contributes to the transition, or both. That, in turn, is
why we advocate for engagement before divestment. And that implies a
need for bottom-up, fundamentals-focused active management: with the
oil and gas sector in era-defining flux, selecting the winners and avoiding
the losers is likely to be hugely consequential to long-term returns, and
it’s going to be hard to do that if you’re looking only at backward-looking
carbon footprint measurements rather than forward-looking strategy and
capital allocation plans.
Not every company will navigate these uncertainties successfully. Some
have management teams with the skills and leadership qualities that are
needed. Some have boards that will be disciplined about ensuring precious
capital is not squandered. These are highly complex challenges of strategic
That’s why we get frustrated at the charge that integrating financially
material environmental, social and/or governance factors is some kind of
“activism.” When an analyst looks into an automaker’s electric-vehicles
strategy, or how a retailer’s labor conditions compare with those of its
biggest competitors, or the independence of company’s board members,
this isn’t “woke capitalism”—they’re simply doing their job. It’s no
different from enquiring about the automaker’s marketing strategy or
cost structure.
Do some clients ask us to go beyond simply managing these financially
material risks and opportunities in their portfolios? Certainly. Some
want to see social and environmental sustainability issues weighed with
an importance commensurate with their financial objectives: they may
actively seek to invest in leading issuers with sustainable business models,
practices, products or services. Others want to go still further—seeking, as
a primary objective, investments whose core business, products, services
or use of proceeds directly contribute to measurable positive social and
environmental outcomes. For these investors, we offer sustainable and
impact investing strategies, which represent 2.1% of the assets with
which we are entrusted. These strategies are clearly labelled in the name
of the fund (“Sustainable” or “Impact”) and come with accompanying
disclosures about the types of investments they will and will not make.
Again, this isn’t “woke capitalism,” it’s freedom of consumer choice, and
actively seeking to achieve each client’s objectives.
The “box-ticking” accusation made by some critics against the industry is
closer to the mark, in my view. There is no doubt in my mind that some
asset managers take a simplistic approach to the analysis of ESG-related
factors and then wrap it in bold marketing claims. This allows those with
an axe to grind to accuse our entire industry of “virtue signalling.”
For a box-ticker, it may be enough that a company has made some sort of
commitment for emissions reduction by 2050. We try to know more about
their plans. That’s why we developed our Net-Zero Alignment Indicator,
which takes more than 30 metrics from leading ESG data providers and
specialized climate data sets and augments them with sector-specific
judgment and qualitative insights from our credit and equity research
7
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 ENGAGEMENT WORKS: 2022 HIGHLIGHTS FROM NB VOTES
Through our NB Votes initiative, we publish our vote intentions in advance of select shareholder meetings,
with a focus on companies where our clients have significant economic exposure.
Company
Issue
Result
Action
Why Is It Material?
Bunzl Plc
(U.K.)
No independent directors
overseeing material ESG matters
despite sustainable supply chains
being a strategic objective.
Bunzl’s board formalized ESG
oversight within a designated
board-level committee.
NB engaged with the company
and supported the reelection
of the board chair following
commitment to address this
issue at the next board meeting.
Building sustainable supply
chains and helping reduce its
customers’ carbon footprints are
key strategic objectives at Bunzl,
which makes products for a
variety of industries, from grocery
to healthcare.
With electric vehicles now a
cornerstone of GM’s long-term
strategy, we believed there
was an opportunity to tie
compensation more explicitly to
the company’s EV objectives.
Multiple engagements and a
letter to the board.
Multiple letters and opposition
to reelection of directors; since
2020, disclosing our concerns and
voting intentions ahead of annual
meetings.
We believe sound/good
governance practices are
foundational to sustained,
long-term value creation.
8
General
Motors Co.
(U.S.)
Executive compensation
insufficiently aligned with
performance toward the
company’s decarbonization and
electric vehicle (EV) objectives.
Netflix Inc
(U.S.)
Repeated failure to implement
majority-approved shareholder
proposals.
Various improvements, including
new EV-related metrics
comprising 15% of GM’s 2022
long-term incentive plan (LTIP);
and enhanced disclosure of
factors used to evaluate
each executive.
At its last meeting, Netflix
proposed to adopt simple-
majority-vote requirements;
require each director to stand
for annual reelection rather
than a three-year term, and to
receive a majority vote; and
allow shareholders to call special
meetings at a threshold of 20%
of outstanding shares.
Yamaha
Corp
(Japan)
Yamaha included ambitious
targets for sourcing sustainable
wood for musical instruments in
its Mid-Term Plan, but few details
on how it planned to achieve
those targets or its long-term goal
of 100% sustainable sourcing;
also, its disclosures are not yet
aligned with globally recognized
ESG standards.
Yamaha set a higher, 75% target
for sustainable procurement
in its latest Mid-Term Plan,
and added detail on initiatives
required to meet that
target—chiefly, a third-party
accreditation system to lower
costs for sustainable suppliers;
we continue to advocate for
standard ESG disclosures.
We recommended increasing
specificity on the sustainable
sourcing initiative, with more
detail on how to achieve the
firm’s goal of 100% sustainable
procurement; and adopting
standard ESG disclosures.
Long-term, scarcity and the rising
cost of timber, driven in part
by climate change and illegal
logging, presents a challenge to
Yamaha’s ability to maintain scale
and a strong brand reputation.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 analysts. We believe that this gives us a much stronger basis for analyzing
the transition-related risk that individual companies are running. We can
use that assessment to help manage potential climate-related risk in
portfolios and shape our dialogue with companies.
We struggle to see how one can identify and understand genuine
investment opportunities, manage financially material investment risks
(whether ESG-related or not), or, where relevant to a strategy, integrate
ESG analysis into an investment process or identify sustainable or
impactful business models, without being a committed active manager
and engaged owner. In our view, active managers who are not analyzing
and engaging at this depth need to explain to their clients why they are
not doing so.
In addition, passive managers have a particular responsibility to explain
that traditional index funds like the one that tracks the S&P 500
simply cannot integrate financially material ESG factors into security
selection—any more than they can integrate management quality or
accounting quality into security selection. We believe passive managers
also have a responsibility to explain that their engagement efforts will
be severely limited due to the sheer number of their holdings and curbs
on how actively index products can be managed. This is a huge missed
opportunity, given the potential power that their ownership stakes give
them. It means that investors who might own large stakes via their index
allocations only get meaningful influence via the much smaller stakes they
own with active, more engaged managers—effectively trying to steer the
bus from the back seat.
I‘ve focused on the ESG debate here, but we’re really talking about the
much broader subject of actively managed investment and engaged
ownership. We think the expected transition to higher inflation and
interest rates, lower growth, more economic and market volatility and
greater dispersion between corporate winners and losers will favor active
management over the coming cycles. But we also believe that engaged
ownership is necessary to be an effective steward of capital, period.
The ESG debate has sharpened investors’ focus on the environmental,
social and governance regulation and broader consumer awareness
that corporations have to grapple with, and on the importance of active
decision-making and engaged ownership. In doing so, it may prove the
strongest tailwind behind the turn back to active management, regardless
of the macroeconomic and market background.
Retaining Our Global Outlook and Ambition
When I began writing this message, large balloons and other unidentified
aerial objects were kicking up a quite serious—and frankly somewhat
strange—diplomatic incident between the U.S. and China. Strange
as it was, it also reflected how the war in Ukraine, and the emerging
re-alignment of relations between the U.S., China, Western Europe,
Russia and the “Global South,” has further complicated and polarized the
conversation about globalization, just as it has complicated and polarized
the conversation about the energy transition.
As investors, we acknowledge and, in many portfolios, are positioned
for a de-globalization trend. Some of this trend has valid foundations
in economics, risk management and democratic politics: near-shoring,
onshoring and automation are now often more cost-effective than
offshoring activity; we are in a post-pandemic, post-lockdown and more
geopolitically volatile world; and good jobs and equality of opportunity
are important to the social fabric. Increasingly, however, it is driven
by harmful populism. And this is not just an issue between strategic
competitors, but also between allies: witness the controversy in Europe
over the U.S.’s Inflation Reduction Act, for example.
Many of our clients seek regionally diversified exposure to the full range of
drivers of global economic growth: excluding the world’s second biggest
economy and a primary source of global growth would likely lower returns
over time. The Inflation Reduction Act notwithstanding, much of the
hardware we need to decarbonize the global economy is still likely to be
built in China: providing the capital for those efforts is, in our view, both an
environmental imperative and a material growth-investment opportunity
for investors worldwide. At the same time, by investing Chinese capital in
Chinese markets we have an opportunity to support Chinese companies’
understanding of increasingly global ESG standards. As the second global
asset manager to be approved for a local Fund Management Company
(FMC) license, we take our responsibilities seriously.
If we don’t engage with China’s economy, companies and asset owners in
these ways, opportunities are lost, simply because China is so important:
for example, if the rest of the world achieves net-zero emissions but China
does not, the positive impact on climate change will be limited.
As with ESG, it is government officials, not asset managers, who should be
determining policy. But we hope that our engagement can contribute to a
more positive world for our clients and our communities.
9
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 Thinking and Acting With Humility
The business and investment outlook; the energy transition; the ESG, sustainable and impact investing debate;
investing and doing business across geopolitical fault lines. These are not black-and-white issues, in our
view. They are complicated. As our clients and partners, we believe you would expect us to approach these
challenges in the same way we approach investing: respecting the data, gathering and analyzing important
detail, weighing the risks and the opportunities, trying to do what’s right for our clients over the long term—
and always thinking and acting with a generous dose of humility.
It is with that humility at the forefront of our minds that we thank you for entrusting us with your capital.
We will continue to do our best to maintain that trust as we move forward.
10
Our Investment Platform
FIRM ASSETS UNDER MANAGEMENT $427BN*
MULTI-ASSET STRATEGIES
PUBLIC
MARKETS
$315bn
PRIVATE
MARKETS
$112bn
EQUITIES
FIXED INCOME
FUNDAMENTAL
QUANTITATIVE
Global
U.S.
Emerging Markets
Custom Beta
Global
U.S.
EAFE / Japan
Emerging Markets
– China
Thematic Strategies
MLPs
Global Investment Grade
Global Non-Investment Grade
Emerging Markets
Municipals
Multi-Sector
Currency
HEDGE FUNDS &
LIQUID ALTERNATIVES
FUNDAMENTAL
QUANTITATIVE
Hedge Funds
Liquid Alternatives
Options
Global Macro
Risk Parity
Risk Premia
REAL ASSETS
Commodities
Diversified Real Assets
Global REITs
U.S. REITs
Long/Short Real Estate – Almanac
11
$119bn
$168bn
$24bn
$3bn
PRIVATE EQUITY
PRIVATE CREDIT
SPECIALTY ALTERNATIVES
PRIVATE REAL ASSETS
Primaries
Co-Investments
Secondaries
Specialty Strategies
Private Debt
Credit Opportunities
Special Situations
Residential Loans
Specialty Finance
Private Placement
European Private Loans
Hedge Fund Co-Investments
Insurance-Linked Strategies
Late Stage Pre-IPO
SPACs
Private Real Estate – Almanac
Real Estate Secondaries
Real Estate Primaries & Co-Investments
Infrastructure
$79bn
$21bn
$5bn
$7bn
*Firm AUM as of December 31, 2022. Figures may not sum up due to rounding.
ESG INTEGRATION | GLOBAL RESEARCH CAPABILITIES | DATA SCIENCE
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023
SPOTLIGHT
The Large Cap Value Team
12
Our team seeks to invest in U.S. public companies with com-
pelling catalysts and market capitalizations greater than
$3 billion, which the team believes are undervalued.
The Neuberger Berman Large Cap Value Team employs a long-only,
actively managed strategy that seeks to identify companies trading at
meaningful discounts to their mid-cycle, earnings-based valuation esti-
mates. Our team—led by established value investors Eli Salzmann and
David Levine—has 31 years of experience on average, and works closely
with the Neuberger Berman Global Equity Research Department.
Investing With Conviction
Following the 2008 financial crisis, an extended period of artificially low
interest rates tilted investor bias toward growth stocks with naturally
longer durations. Our team believes that the easy-money era is over and
value-oriented stocks, with shorter durations, will play an increasingly
important role in prudently diversified portfolios.
Our disciplined investment philosophy is based on a blend of three core
tenets (see chart on the next page):
• Normalized earnings have historically been more effective than point-in-
time earnings as an indicator of long-term company health.
• Industries hampered by capacity constraints tend to face less competition,
enhancing some companies’ ability to earn better margins in future years.
• While some stocks are cheap for a reason, emphasis on potential
catalysts—such as new product launches, management changes and
corporate spinoffs—can help avoid value traps.
Our team also employs a combination of fundamental research, data
science and engagement with company management to uncover value
that, in our view, is not captured by financial characteristics alone.
Finally, we believe that maintaining long-term investment horizons can
help identify attractive investments by putting near-term anomalies into
clearer perspective.
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
The Sweet Spot of Value
Capital and Capacity
Seek companies in industries
starved of capital and capacity,
which means less competition and
opportunity for higher margins
13
Depressed Earnings
Focus on investments that are
cheap relative to normalized
mid-cycle earnings
The
Neuberger Berman
Large Cap
Value
Difference
Catalyst-Driven
Emphasis on catalysts for
“normalization” to occur;
seeks to avoid “value traps”
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
THE VOICE OF THE CLIENT
Opening Up Private Markets
The introduction of alternative investments to a greater cross-section of investors has been a major theme
on the asset management landscape. Among our long-term partners, Merrill Lynch stands out as a key
mover in this trend through its extensive advisor platform. Our relationship with Merrill is longstanding.
From our addition in 1994 as a long-only manager in its separate account platform to our continued work
together on innovative portfolios, including private equity funds, over the past decade, we have sought
to pinpoint and deliver solutions that work for Merrill Lynch clients. We recently spoke with John V. Leale,
Managing Director and Head of Private Equity and Real Assets Product Origination at Merrill Lynch, about
the trend toward opening up the private market universe.
14
Why are we seeing the “democratization” of alternative
investments, and how has it been reflected at Merrill Lynch?
John V. Leale
When I think about alternative investments over the years, most of those
we’ve offered have been for qualified purchasers with investment portfo-
lios of $5 million or more. However, alternatives are increasingly available
in structures for a broader range of clients—something that’s a significant
benefit to our financial advisors and their clients who previously might not
have been available to access such investments.
The industry has been talking about the democratization of alternatives
for many years, but we’ve seen this really pick up over the last three to
five years. The introduction of products for accredited investors, with lower
fees and more visibility of Net Asset Value, has helped spur demand/
interest in the marketplace. In the industry, the addition of alternatives
to a traditional stock/bond portfolio can help to smooth volatility. At the
core, our efforts have been about the ability to offer these characteristics
within a diversified portfolio—centering primarily on real assets, credit
and private equity.
How is this process evolving?
Looking at the market today, many private equity managers are realizing
the opportunity of being able to raise capital from wealth management
sources. At the same time, I would say that individuals in general are
underexposed to alternative investments. For large endowments and
institutions, it’s common to see exposures of 30 – 50% or more. Based
on our CIO guidance, appropriate levels for individuals may range up to
20% or more of a diversified portfolio, depending on time horizon and
risk tolerance. Although we may not reach the upper end of that range
for most clients, I do think that retail wealth management penetration
will continue to grow.
Many clients are understandably sitting on the sideline at the moment,
waiting for volatility to ease. However, we reinforce the idea that private
equity exposure is something you can’t time. Individuals should have
a consistent approach to investing in private equity as to not miss any
particular vintage year exposure—a lesson reinforced at the end of the
financial crisis, a time that produced some of the better-performing private
fund vintages in the marketplace.
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
Merrill Lynch spoke with Neuberger Berman on March 3, 2023.
15
How do outside managers fit into this
picture?
It’s important to understand that we don’t look
at ourselves as a supermarket. We strive to find
the top decile/quartile opportunities for our
platform to help our advisors and their clients
diversify their portfolios. Evergreen products,
which can be invested in consistently rather
than based on an offering cycle, are an impor-
tant development. We decided that we were
going to be very calculated in how we offered
them, and concise in the opportunities we were
selecting—limiting ourselves to what we feel
are the top managers in the marketplace.
Looking ahead, what do you anticipate
from the democratization trend?
In my view, we are still in early stages, but
the democratization of alternatives is rapidly
evolving. Once we emerge from this period
of volatility, I think the advent of these prod-
ucts is going to be tremendous in terms of
fundraising and acceptance. For that reason,
we plan to continue adding products across
our platform, providing opportunities for our
broad client base. We want to be in a position
where we have the right strategies available
when markets open up again, at which point
I believe assets in alternatives are likely to
grow substantially and represent an increased
weighting in client portfolios.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 ANNUAL REPORT – JUNE 2023
17
A Culture
That Drives Us
Corporate Social
Responsibility:
Our Impact in 2022
Our employees care deeply about making an impact on the communities
in which we live and work. We bring the same passion, rigor and focus to
working with our nonprofit partners as we do with our clients, leveraging
our skills, experience and resources to make an impact.
Celebration with Service (CwS), Neuberger Berman’s signature volunteer
initiative, is a prime example. Created in 2010 to celebrate our re-emergence
as an independent, employee-owned firm, CwS brings employees together
each May to give back in our local communities. Over the years, our
colleagues have demonstrated their community leadership by introducing us
to organizations and causes that are important to them, leading meaningful
volunteer projects and engaging others to join them. Our employees have
beautified community spaces, read to children, shared advice on resumes,
conducted mock interviews, served meals and much more.
18
2) working closely with our nonprofit partners in identifying their biggest
needs. For our employees, returning to CwS served as reminder of our
commitment to service and our culture of partnership. Employees look
forward to CwS each year not only to give back, but also to connect with
colleagues outside of the office. This year in particular, we had a significant
number of new employees who leveraged this initiative to build their
internal networks and experience an important part of our firm’s culture.
Similarly, our nonprofit partners navigated what a post-pandemic volunteer
project entailed, and we were welcomed with open arms.
For over a decade, employees have looked forward to CwS, and we look
forward to expanding and deepening our impact.
As our volunteerism returned to a more normal state in 2022, our
objective was two-fold: 1) re-embracing our culture of service and
MARIA ANGELOV
Neuberger Berman Foundation President
100+
NONPROFIT
PARTNERS
3,000+
MEALS SERVED
25+
OUTDOOR SPACES
BEAUTIFIED
4,000+
HOURS
VOLUNTEERED
1,500+
CARE PACKAGES
PREPARED
1,300+
VOLUNTEERS
750+
STUDENTS SERVED
110+
VOLUNTEER
EVENTS
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
We Amplify Our Impact Through a True Employee and Corporate Engagement Partnership
WE CONTINUE TO BE
GRATEFUL FOR THE
ENGAGEMENT OF OUR
COLLEAGUES GLOBALLY
WHO ARE COMMITTED
TO SERVICE IN THEIR
LOCAL COMMUNITIES.
NB Foundation Giving
Civic
Engagement
People with
Purpose
19
Employee Gift
Matching
Nonprofit
Board Service
Volunteerism &
Celebration with Service
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
Employee Resource Groups
Broaden Their Impact with
Nonprofit Relationships
Similar to how we follow the lead of our
employees in identifying organizations to
support during Celebration with Service, our
Employee Resource Groups partner with
nonprofit organizations that serve their
specific populations.
• The NB Veterans Group supports American
Corporate Partners, an organization that
assists recently returned veterans as they
transition from the military to corporate and
civilian life. Through this partnership, over 20
employees have served as mentors in year-
long one-on-one mentorships with veterans.
• The NB Hispanic & Latinx Network
(HLN) partners with School
in the
Square, a tuition-free, public charter school
in Washington Heights and Inwood, serving
predominantly Hispanic and Latino children.
As part of Hispanic Heritage Month, mem-
bers of HLN spent time with second-graders,
which included reading Hispanic Heritage
Month-themed books and sharing personal
stories and experiences.
• NB APPEAL (Asian Pacific Partners
for Empowerment, Advocacy and
Leadership) partners with Apex for
Youth, a nonprofit that empowers under-
served Asian and immigrant youth from
low-income families through one-on-one
mentoring relationships, educational pro-
grams and social services.
20
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 Dublin & Barretstown
Sydney & Salvation Army
ESG Team & Billion Oyster Project
North America Intermediary Team & Central Park Conservancy
Private Wealth & Central Park Conservancy
Almanac & Riverside Park Conservancy
Celebration with Service –
A Global Impact
We continue to be grateful for the engagement
of our colleagues globally who are committed
to service in their local communities.
• In Dublin, we beautified the landscape of
Barretstown, a residential camp for children
with severe illnesses.
• Toronto employees served meals at Fred Victor,
an organization that operates shelters and
transitional housing for individuals and families.
• Our employees in Hong Kong removed
invasive species to preserve the ecosystem
at Wetland Habitat Preservation at Mai Po.
• In Luxembourg, we purchased and collected
items to distribute to Ukrainian refugees.
• Sydney & Melbourne: Employees pre-
pared and served meals with the Salvation
Army Café
landscaped, removed
Team Projects
This year, many of our employees volunteered
as teams, which provided a unique opportu-
nity to reconnect with one another. Employees
beautified,
invasive
species and cleaned up outdoor spaces. We
thank our partners, Central Park Conservancy,
Riverside Park Conservancy and Billion Oyster
Project, for hosting our Almanac Private Real
Estate, North America Intermediary and ESG
Investing teams.
21
We were delighted to welcome American Corporate
Partners Veterans to speak to our U.S. Institutional Group.
NB Hispanic & Latinx Network & School in the Square
School in a Square
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 22
Equity, Inclusion
and Diversity
THE EQUITY & INCLUSION INDEX
MEASURES THE PERSONAL
EXPERIENCES OF OUR DIVERSE
GROUPS AROUND THE TOPICS
OF MERITOCRACY, CULTURAL
INCLUSION AND ENABLEMENT,
TRAINING AND MENTORING.
Fostering a More Inclusive Workplace
While most firms lead with “diversity,” at Neuberger Berman
“equity” comes first. This reflects our belief that equity enables
inclusion, and that they both foment true diversity. Equity is
about cultivating a fair and unbiased environment in which all
have the opportunity to thrive. It fosters a culture that nurtures
talent based on individual needs, and ultimately enhances our
decision-making with the client in mind.
Our efforts center on four pillars: Sourcing & Hiring, Development &
Retention, Accountability & Measurement, and Culture & Mindset. Across
these, we have refreshed our hiring practices, aligned manager expecta-
tions with EID goals, and enhanced our mentoring program (participation
was up 40% year-over-year). Moreover, we harnessed the power and
motivation of our Employee Resource Groups, now eight in number, to
spearhead networking, mentoring and advocacy across diversity efforts.
Measurement is crucial—and though we still have work to do, we have
made meaningful progress. Women now make up 39% of our global
workforce, up from 35% in 2018; and in the U.S., Asian employees have
increased from 17% to 19% and Hispanic/Latino and Black/African
American groups have each increased by percentage point, to 7% and 6%,
respectively. Our Diversity Index, which compares our gender and ethnicity
versus the college-educated population by corporate title, has seen modest
improvement since 2019, driven particularly by SVP and VP women. Despite
these gains, our senior-most ranks provide a clear opportunity for improve-
ment. We believe that building and maintaining a more representative
workforce overall will help ease the process of senior-level diversification.
We also focus deeply on employee sentiment and are gratified by how
employees across diverse populations perceive the firm’s investment in
them and, importantly, their places here. Our Equity & Inclusion Index
measures survey responses of our diverse groups around the topics of
meritocracy, cultural inclusion and enablement, training and mentoring.
By this measure, our score increased from 88% in 2019 to 94% in 2022,
meaning that the experience of our people, regardless of their ethnicity or
gender, is mostly similar (again, we still have work to do).
From day one, we understood that we could not impose standards from one
region onto others, but we also knew that we needed a global approach.
Now, after concentrating in the U.S., we are deepening our EID efforts in the
Europe, Middle East, Asia and Latin America regions, and more incrementally
in Asia Pacific and East Asia. It’s important to stress that ours is not a top-
down process. What we have accomplished would not be possible without
the tireless contributions of our employees. As we move forward, I have every
confidence that their dedication will remain a crucial driver in advancing our
goals on building a more equitable, inclusive and diverse workplace.
ANDY JOHNSON
Senior Diversity & Inclusion Leader
Equity, Inclusion and Diversity Partnerships
To further drive meaningful progress, we have engaged with several external
EID partners. Whether focused on sourcing and recruiting or development
and retention, each partner organization strengthens our EID framework by
providing resources, benchmarking and measurement tools, as well as net-
working opportunities. In particular, our Employee Resource Groups (ERGs)
have built strong relationships with several external partners that have been
invaluable to us, including LGBT Great and Wall Street Friends.
LGBT Great
Wall Street Friends
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 EMPLOYEE RESOURCE GROUPS
AT NEUBERGER BERMAN
LGBT Great, the first organization to focus
exclusively on the LGBTQ+ agenda specifically
for the financial sector, started working with our
NB Pride Network in 2021. This partnership has
helped guide our policies and best practices,
provide networking and knowledge-sharing
opportunities with industry peers, as well as
offer trainings and mentorship for employees. In
2022, Matt Cameron, Global Managing Director
of LGBT Great, joined us for a discussion on the
LGBTQ+ community in financial services. He
focused on progress made, the opportunities
that remain and intersectional allyship.
“The guidance we receive from LGBT Great—
particularly from their iiBT framework, which
allows us to benchmark ourselves as it relates to
LGBTQ+ EID strategies—has been instrumental
in helping us to be an even more inclusive
firm.” – Will Hunter, Portfolio Manager, The
Messinger Group
Wall Street Friends is a network of diverse
professionals, primarily African-American,
with a focus on facilitating networking and
for mentorship and career
opportunities
development. In 2022, we were pleased to
host WSF’s first post-pandemic
in-person
event: a company showcase including a panel
of Neuberger Berman’s senior Black leaders
moderated by Lauren Holland (Managing
Partner of WSF) where they shared their career
paths and what it means to navigate the
financial services industry as a person of color.
“Wall Street Friends has a unique approach to
empowering diverse professionals by providing
access to various enriching opportunities. We
benefit greatly from their partnership and are
thrilled to continue to support them in their
mission.” – Marc Edmond, Senior Trader
Neuberger Berman Equity,
Inclusion and Diversity Index
Accountability and measurement are at the
core of our business, including how we measure
investment performance, client engagement,
and progress across our EID efforts. In 2019,
we created the NB EID Index and through its
two sub-indices—The Diversity Index and
the Equity & Inclusion Index—we are able
to see another measurement of diversity as well
as gauge the experiences of our people.
• In the Diversity Index, we measure how
closely our firm reflects the college edu-
cated population, which best represents
the broad candidate pool from which we
hire. We look across gender and ethnic-
ity by corporate title—amounting to 56
dimensions—to ensure we measure diver-
sity at all levels of the firm. Our score
reflects where we stand between a figura-
tive non-diverse firm and the college edu-
cated population. As of September 30, our
score of 51.1% means that we are more
than halfway to reflecting the college edu-
cated population, but have much work to do.
• In the Equity & Inclusion Index, we evalu-
ate and compare the experiences of our
employee demographics across three cat-
egories: enablement, training and mentoring;
meritocracy; and cultural inclusion. We do
this by using 15 questions from our biannual
employee survey. The group that scores the
most favorably is our control group and every
other population is then compared to that
population (equal weights are applied, so
size doesn’t impact results). Our current score
of 94%—based of off our 2021 Employee
Survey—means that the populations not in
the control group have a mostly similar expe-
rience to our control group for each category
(we aim for them all to be the same).
23
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 ANNUAL REPORT – JUNE 2023
25
Engagement and
Proxy Voting
Our Approach to
Engagement
Engagement is core to our investment process—whether to inform our investment decision or as part of
our stewardship of the asset. We embed stewardship responsibilities including engagement within our
investment teams which we believe are crucial to integrating stewardship insights into the investment
process and informing investment decisions. We look for companies where we can constructively exchange
insights with board members and management teams. As an active manager, we combine subject matter
expertise with fundamental insights to engage on financially material issues specific to a given company and
its operating profile to drive sustainable value creation on behalf of our clients. Much of our engagement
with issuers arises organically from the investment diligence process, but we are also focused on ensuring
that the same attention and intensity are sustained throughout our stewardship of the asset.
26
We believe that engaging with issuers is an essential part of being a long-
term active owner, and that engaging with issuers on financially material
ESG topics can improve their performance and reduce their risk profile.
With our long-term relationships with companies, Neuberger Berman’s
investment teams are well positioned to engage with companies on these
key issues. In 2022, we conducted 3,439 public equity engagements and
1,254 fixed income engagements.
As an active owner, we employ a variety of engagement tools depending
on the issuer, the issue being discussed and the accessibility of the
issuer. Since our engagement efforts with a given issuer typically span a
multiyear period, it is common to utilize multiple methods of engagement,
such as one-on-one meetings with company management teams, formal
written communication and proxy voting.
While the overwhelming majority of our engagement is done in
collaboration with companies and their management teams, we strongly
believe that the exercise of investor rights prescribed in regulations and
company bylaws are part of our responsibility in the pursuit of value
creation and the protection of our clients’ investments. We believe
engagement should not be a top-down dictated approach, but rather
investment-driven, taking into consideration matters such as investment
objectives, issuer-specific circumstances and our history of engagement.
Where a company does not respond to our concerns or our concerns
have not been sufficiently addressed, we may take escalated action such
as withholding support from directors, supporting a shareholder proposal,
sending letters to the board of directors, making our concerns public, or
joining a collaborative initiative, amongst others. The escalation tools
leveraged will depend on the rights available to us and the circumstances
of the case in question. Importantly, escalation methods are not exclusive
and when an escalation method is utilized, we continue to seek to drive
change through private one-on-one engagements.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 Engagement Overview
3,439
34%
45%
90%
P UBLIC EQUITY
ENVIRONMENT
SOCIAL
GOVERNANCE
TOTAL
ENGAGEMENTS
1,254
63%
51%
74%
FIXE D INCOME
ENVIRONMENT
SOCIAL
GOVERNANCE
27
TOTAL
ENGAGEMENTS
Primary Engagement Topics
TOP ENVIRONMENTAL
TOP SOCIAL
• Green opportunities
• Climate risk management
• Pollution and mitigation management
• Waste/water management
• Environmental and climate reporting
• Human capital management
• Labor relations
• Community/ government relations
• Workforce diversity
• Supply chain management
TOP GOVERNANCE
• Long-term business strategy
• Capital structure
• Disclosure and financial control
• Board independence and quality
• Compensation structure
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 Our Approach to
Proxy Voting
We believe that proxy voting is an integral aspect of active investment management. Many of our clients
entrust us with the responsibility of proxy voting on their behalf, and we take that responsibility seriously.
Accordingly, we believe proxy voting must be conducted with the same degree of prudence and loyalty
accorded any fiduciary or other obligation of an investment manager. Neuberger Berman has developed
custom Proxy Voting Guidelines that comprehensively lay out our voting positions, including the potential
financial impact on a company from corporate governance, environmental and social issues. These
Guidelines are updated as deemed appropriate and reviewed at least on an annual basis.
28
Bringing Transparency and Accountability to
Proxy Voting
In 2020, we launched NB Votes, an advance proxy vote disclosure
initiative in which our firm announces our voting intentions in advance of
the annual general meetings (AGMs) of a select group of companies in
which we invest on behalf of clients. Now in its third year, this program
seeks to share our opinions and provide insight to our analysis by pre-
announcing our proxy-voting intentions on an array of voting topics that,
we believe, have material economic consequences for our clients. The
program underscores our commitment to bringing more transparency into
the proxy voting decision-making process.
NB Votes has three main goals:
• Encourage companies in which we invest for our clients to improve their
governance practices, thereby enhancing long-term value for our clients
• Improve the transparency of our voting process
• Demonstrate how our long-term, active-management approach drives
our voting decisions
Meeting those goals often means going against the grain. In 2022, we
announced our voting intentions on 63 key votes and sided against
management on 54% of them, compared with announcing 60 votes and
pushing back on 52% in 2021. In this latest proxy season, we focused
on proposals addressing a host of issues—from board independence
and ESG oversight, to incentive schemes and capital allocation—that
we believe ultimately shape companies’ long-term financial performance.
At Neuberger Berman, we believe sound corporate governance policies
and transparent reporting are essential for navigating the cross-currents
of this challenging economy. That is why we will continue to urge
companies and their boards to embrace what we see as best practices
through our NB Votes program, while also assessing our own ability to
identify the most salient issues and use our voice effectively.
Pre-announcement of proxy voting intentions may still not be common
practice. Yet as an active manager with voting responsibility on behalf
of our clients, we believe we are well positioned to continue serving
our clients by being transparent in encouraging companies to raise their
governance standards and enhance their financial performance.
For a full list of the votes disclosed as part of our NB Votes initiative in
2022, please see our NB Votes website.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 Percentage of Meetings Voted
57%
North America
2,769 Δ 14%
15%
EMEA
741 Δ -12%
6%
Latin America &
Caribbean
312 Δ -23%
4,900
MEETING VOTED
IN 2022
22%
Asia Pacific
1,077 Δ 1%
29
Voting Statistics
In 2022, our investment teams voted at 4,900 meetings globally. At
meetings voted, management put forth 98% of the proposals with
shareholder proposals comprising the remaining 2%. We find ourselves
opposing many proposals that are either unclear in their alignment with
shareholder interests or at odds with our judgment of the best course for
the company. This is reflected in both the 13% of management proposals
and the 64% of shareholder proposals we opposed. We opposed
management on at least one ballot item at 46% of meetings in 2022.
Some of the main areas of opposition for management proposals involved
director elections, management compensation and share issuances
without a clear justification for high levels of dilution. Main drivers for
opposing management recommendations on shareholder proposals were
related to the separation of chair and CEO, disclosure of emissions data,
and political spending and lobbying disclosure.
On our website we provide our voting record on common proposal
categories, and highlight a selection of votes that we deemed notable
from 2022.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 The following case studies provide
examples of our engagement activities
and outcomes on a range of financially
material topics across different markets,
asset classes and sectors.
Our work in this area is the best reflection of our investing culture—built around being well informed, with clear views,
and ready to use all the tools at the disposal of investors to protect and enhance the value of our clients’ investments.
30
Constellation
Brands, Inc.
Yamaha
Corporation
First Solar, Inc.
CASE STUDY
Constellation Brands, Inc.
ISSUE
Shareholder Rights
CATEGORY
Governance
STRATEGY
Large Cap Value
SECTOR
Consumer Staples
BACKGROUND
Constellation Brands is a leading, multi-category alcohol
supplier in the U.S., as well as the country’s top purveyor
of premium beer, including major Mexican brands Corona
and Modelo. As a firm believer in strong corporate
governance, we encouraged the company to increase
shareholder representation by eliminating its dual-class
share structure, as an increasing number of companies
have shifted away from these legacy structures to single-
class shares structures. In 2022, Constellation’s controlling
shareholder offered to convert its Class B voting shares to
Class A common stock, thereby consolidating the share
classes and democratizing voting control of the company.
SCOPE AND PROCESS
Neuberger Berman engaged with the independent special
committee of the board charged with negotiating the
agreement, which ultimately involved a $1.5 billion
cash payment to the Class B shareholders—equal to a
substantial 26.5% premium over the then-recent closing
price of the common stock.
While we advocated for a lower conversion premium,
we were pleased with other proposed governance
upgrades—including anti-pledging policies (to limit how
much executives can borrow against their shares), a
majority voting standard in uncontested elections, and
the board’s commitment to rotating the lead independent
director position. In our view, such policies generally
increase management’s accountability to shareholders and
improve overall governance practices.
OUTCOME AND OUTLOOK
We believe Constellation Brands has taken significant
steps to improve its governance profile—and we intend
to continue engaging with the company on material
environmental, social and governance issues to help serve
shareholders well in the long term.
31
32
CASE STUDY
Harmonizing with the Environment
ISSUE
Sustainable Procurement
CATEGORY
Biodiversity
STRATEGY
Japan Equity
SECTOR
Consumer Discretionary
BACKGROUND
Yamaha Corporation is the world’s largest manufacturer of
musical instruments and a long-term holding of the Japan
Equity Engagement strategy. The investment appeal of the
company includes what we consider strong financials and
attractive growth prospects, as well as proactive efforts to
address material environmental and social issues. Keys to
the business include scale and brand: scale to maintain cost
effectiveness, and brand to ensure that customers associate
Yamaha with a high level of quality. A long-term challenge
that could affect these characteristics is the scarcity and cost
of timber used to make musical instruments, driven in part
by climate change and illegal logging.
SCOPE AND PROCESS
As part of our broad engagement, we connected with
Yamaha in 2021 on biodiversity and specifically the
reliable procurement of certified timber—an issue that
could affect its ability to make high-end acoustic pianos
and other instruments, and thus affect its brand image.
At the time, the company sought to procure 50% of its
certified timber from clearly identifiable sources, to avoid
the risk of obtaining timber that has been illegally logged.
As long-term investors, we believe Yamaha’s ability to
maintain global scale and brand loyalty is contingent
on its continued manufacture of high-quality acoustic
musical instruments. Hence, the sustainable sourcing of its
prime raw material is critical to its business fundamentals
and growth outlook. For this reason, we encouraged
new approaches to enhance the company’s responsible
procurement and to plan for periodic supply bottlenecks
given timber’s status as a finite resource.
We approached the company as it prepared its mid-term
business plan, where it would set its strategic agenda and
establish key performance indicators for the next three
years. Among our recommendations, we asked that the
company integrate its sustainable procurement initiatives
into its business plan and consider improving related
disclosures in line with globally recognized ESG standards.
Later, we continued our discussions and toured a company
piano plant to better understand its manufacturing and
timber processing.
OUTCOME
Yamaha was receptive to our ideas, noting that it was
already working to expand its certified timber allocation.
In fiscal (March) 2022, the company was able to procure
52% of its timber from certified sources, and in its new
three-year plan, it committed to raising this target to
75%. To do so, Yamaha joined forces with an accredited
third party to create an internal certification system, which
would reduce the financial burden on suppliers from
licensing. We believe this is a significant step that could
help the company eventually achieve 100% procurement
of certified timber. Importantly, Yamaha’s actions could
have broad implications, encouraging others to adopt
similar standards.
Going forward, we will continue to engage Yamaha to
strengthen its biodiversity disclosures, consistent with
globally recognized ESG reporting guidelines.
CASE STUDY
Adding Impactful Solar Capacity
ISSUE
Enhancing Sourcing Reliability
CATEGORY
Supply Chain Management
STRATEGY
U.S. Equity Impact
SECTOR
Information Technology
BACKGROUND
First Solar is U.S.-based company that manufactures solar
panels—a product that has come into increased demand
due to cost-competitiveness and policy support in the
fight against climate change. It has been a holding of
the Neuberger Berman U.S. Equity Impact strategy since
inception. Although viewing it as a leader in its field,
we believed there was additional potential, particularly
relating to capital investment choices.
SCOPE AND PROCESS
As part of a cyclical industry, First Solar generated significant
cash holdings through 2020 and was considering uses for
that capital, including calls from the investor community
to return capital to shareholders. Although it had been
historically hesitant to invest in new facilities given
the potential oversupply of panels, we advocated for
expansion of new capacity in the U.S., in the belief that
it would not only prove profitable, but have a significant
positive impact by increasing the capacity of the domestic
supply chain and reducing emissions. We continued a
dialogue over the next two years on the manufacturing
issue, on enhancing the independence of its board of
directors and on setting science-based emission reduction
targets. As supply chain security and the environmental
footprint of solar moved up the priority lists of customers
and policymakers, we also wanted the company to be
positioned for any potential benefits.
OUTCOME
In 2021, First Solar announced a $700 million investment
in a new Ohio facility, as well as $700 million in a
new plant in India, creating more than 1,000 direct
manufacturing jobs. In the fall of 2022, President Biden
signed the Inflation Reduction Act, providing significant
tax credits for U.S.-manufactured panel production, and
adding to the competitive advantages enjoyed by First
Solar—something that was reflected in record bookings
last year. To further meet customer demand, the company
announced $1.4 billion in outlays for an Alabama
production plant and an Ohio R&D center. In aggregate,
the announced capacity will help First Solar triple its
positive impact from avoided emissions over 2020 levels
while providing 3,000 manufacturing jobs in the U.S. and
supporting the addition of 15,000 jobs at other companies.
In addition, First Solar appointed its first lead independent
director in 2021 and two new members to the board in
2022, enhancing its governance profile. It also set science-
based emission targets to reduce its Scope 1 and 2 GHG
emissions by 34% by 2028 and achieve net-zero emissions
by 2050.
33
SPOTLIGHT
The U.S. Equity
Impact Team
34
Our team invests in U.S. public companies that have the potential
to deliver significantly positive social and environmental outcomes.
The U.S. Equity Impact team seeks long-term total return by investing
primarily in U.S. public companies that create products and services
we think will deliver positive social and environmental outcomes
(“impact”) aligned with the United Nations Sustainable Development
Goals. Canvassing across size, industry sector and investment style, our
team aims to identify companies that address five key impact themes (see
chart on next page).
We believe we take a unique—and robust—approach to impact invest-
ing. Rather than relying on third-party data, which can fail to capture a
company’s true social and environmental impact, we developed a
proprietary quantitative assessment that monetizes the value of material
environmental or societal outcomes at the company level. Our bottom-
up analysis uses a combination of public-company disclosures and
scientific-based evidence to quantify a company’s impact for every dollar
invested—a metric we call the “NB Impact Ratio.”
Impact in Action
Our portfolio includes companies striving to make significant contribu-
tions toward the NB Impact Themes. Specifically, 30% of the portfolio (by
asset weight) helps combat climate change and enables energy transi-
tion. In aggregate, our portfolio companies deliver products and services
that, by our estimates, help the planet avoid about 160 million tonnes of
greenhouse gases every year.
In our view, greater global adoption of climate solutions will continue to
create an array of investment opportunities—not only in clean tech, but
across a range of industries, from freight rail to heating, ventilation and
air conditioning—thereby providing welcome portfolio diversification and
ultimately enabling further positive climate impact.
Investing With Intention
Our team believes in choosing investments based on their potential to
deliver positive social and environmental outcomes, and clearly communi-
cating these objectives with companies and investors. We aim to deliver
incremental impact in three primary ways:
• Active engagement: Our relatively rare approach involves actively
engaging with company management teams to encourage them to
maximize long-term impact through capital allocation decisions, indus-
try collaboration and clearer climate reporting.
• Incremental capital: Our strategy provides growth capital raised in
private placements, IPOs and follow-on offerings to help companies
successfully transition from private to public markets.
• Extending the impact ecosystem: We believe investing with impact
objectives in public markets will continue to support impact efforts
within the private-market ecosystem.
We believe our U.S. Equity Impact team’s thoughtfully differentiated
investment process has the potential to deliver significant real-world
impact while generating attractive risk-adjusted returns.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 NB Impact Themes
S O C I A L
ENVIRONMENTAL
DELIVER
sustainable growth and fair employment
COMBAT
climate change and enable energy transitions
35
IMPROVE
positive health and safety outcomes
CONSERVE
natural environment
PROMOTE
gender and racial equality
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
THE VOICE OF THE CLIENT
Partnership Works
Both Ways
The Brunel Pension Partnership manages £35bn in pooled pension assets for the Environment Agency and
nine local authorities in the South West of the U.K. We spoke to Brunel’s Chief Investment Officer David
Vickers about how pooling 10 funds into one has changed the relationship between these institutions and
their external asset managers.
36
Brunel’s 10 pension schemes are saving more than £13m a year
in asset management fees, relative to pre-pooling. How has that
been achieved?
David Vickers
Scale is important. The 10 underlying schemes average less than £4bn
and pooled we are £35bn. And as the Local Government Pension Schemes
(LGPS) often invest similarly, we bring LGPS scale as well as Brunel scale.
That is valuable to asset managers, not only because we make bigger
investments, but because they now deal with one entity rather than many.
In addition, our partners schemes remain open, and so they are not
de-risking or looking for an insurance buyout, and that gives our assets
a longevity that is attractive to asset managers. We also think about rela-
tionships with asset managers as partnerships, not transactions, and we
believe we bring something valuable, especially on sustainable investing.
How challenging was it to bring all of those investment portfo-
lios together, to satisfy those diverse needs?
Some of the local authority schemes had collaborated loosely for a long
time already. That helped, as did getting the governance right from the
start—making sure everyone was comfortable around transparency,
oversight and allocation of responsibility.
We designed the new pooled funds under the schemes’ guidance, to
their specifications. There’s been no disagreement over the managers we
have selected, which is a testament to Brunel’s team and the fact that we
consult with the schemes throughout the decision process. But it’s also
because the discussion is now less about the asset managers and more
about how well different investment strategies fit the schemes’ objectives.
When we selected for multi-asset credit, for example, an important crite-
rion was that credit selection should be a more important driver of excess
returns than duration management: we wanted generally short duration
to balance the long duration in the rest of our portfolio.
Does pooling enable the schemes to do more in private markets,
by freeing up fee budget but also by creating scale for more
substantial commitments?
It doesn’t enable them to do more, but it enables them to do it differently.
Before, most had to take a fund-of-funds approach. Through Brunel, they
have genuine private markets partnerships, with the chosen partner act-
ing as our due diligence filter while we apply our portfolio construction
capabilities to create bespoke programs. That means we get to be more
opportunistic, and can be selective in secondaries and co-investments. It
also means that every one of the 10 schemes has shaped the portfolio
specification—especially when it comes to something like climate impact
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
The Brunel Pension Partnership spoke with Neuberger Berman on February 17, 2023.
investments, for example, where we were
able to size the allocation to the level we col-
lectively desire. That makes a big difference:
we can select the managers we really like and
then create the portfolio we need, rather than
selecting a manager based on the portfolio
they’re offering.
The Cornwall Pension Fund has a private
assets strategy that aims to combine
financial returns with local impact. Do
you think there is appetite to do more
in that vein?
Certainly. The government’s “levelling up”
agenda has been important, but local authorities
naturally want to stimulate economic activity or
make a positive impact locally. We’ve always
told our managers to let us know when they
have local projects, and as Cornwall was making
this move, two of our managers were starting
projects in the region. Is Cornwall’s £100m
investment relatively small? Yes, but the asset
manager gets the perfect client, fully engaged
and a strong sign that the local community is
onboard. Each region has a different topography
and economy, but now Cornwall has shown
what can be done, other schemes recognise
the potential opportunities for local impact
investing, from providing affordable housing
to creating renewable energy assets and jobs.
It’s notable that partnership with
Brunel’s asset managers came up again
in that example. You mentioned bringing
value to these partnerships, particu-
larly in sustainable investing. How does
that work?
I think it works in two ways. A partnership with
us says something to the market about your
sustainability credentials. And while the Asset
Management Accord that all our partners have
to sign up to puts a stake in the ground with
regard to our institutional values, it’s equally
important that we are pragmatic, patient and
engaged on sustainability—it’s about where
we are going as a partnership, as much as
where you’re at as an asset manager.
That’s especially the case in areas such as
private markets or sub investment-grade credit,
where reporting standards aren’t so advanced.
We understand the limitations and we’re ready
to work pragmatically on best practice. Let’s
talk through how many of your portfolio com-
panies have emissions-reduction targets; then
let’s talk about how credible those targets are;
then we can start to delve into the reported
data. It’s a gradual process, and at all stages
our Responsible Investing Policy is essentially
comply-or-explain. If we have a strong belief
that a company is struggling to align with
emissions-reduction targets, for example, we
will present the evidence we see, but we won’t
assume we know that company better than the
asset manager’s analyst: we will ask why that
analyst takes a different view with an open
mind. We learn together, and the asset manager
can take that experience into the conversations
it has with other institutional investors.
It’s been a year of controversy in ESG
and sustainable investing. What do you
think investors have learned?
In the U.K., I think investors have learned that
performance of a portfolio invested in line with
your Responsible Investing Policy will not be
linear. It’s an active decision and active invest-
ment never delivers linear outperformance. But
along with that has come a recognition that
short-term underperformance doesn’t invalidate
the long-term sustainable investment opportu-
nity, any more than, say, short-term outperfor-
mance by growth stocks invalidates a long-term
value investing strategy.
I think the past two years are also a warning
that regulation might have unintended conse-
quences if it starts to motivate decision mak-
ing. In the context of the European Union’s
Sustainable Finance Disclosure Regulation
(SFDR), for example, there’s a danger that
Article 9 funds become seen as the “most
sustainable.” But an Article 8 fund engaging
with fossil fuel utilities to help them transition
to renewables surely has a bigger impact than
a fund investing exclusively in wind farms.
After all, genuinely sustainable investing isn’t
about decarbonising a portfolio, it’s about
decarbonising the economy.
Over the past two extremely unusual,
volatile years, what’s the most important
thing you’ve learned as an investor?
Have they really been extremely unusual?
We have a tendency to see the most recent
upheaval as the most dramatic, but perhaps
that lacks historical perspective. As a long-
term investor, you have to try to look through
the noise and pick out the secular themes and
turning points that are genuinely important,
and position accordingly. What seems normal
today was once new and unusual, and may
not last forever: the globalization trend, for
example; or the fiscal and monetary support
that, in a more inflationary world, may no
longer be there. Decarbonizing the economy
is absolutely huge, and we knew it would
have to happen long before Ukraine, COVID-
19 or the Global Financial Crisis. Sometimes
the most profound changes are the ones that
occur gradually.
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
37
39
ANNUAL REPORT – JUNE 2023
ESG
Investing
Our ESG Philosophy
40
As an active manager, our purpose is to deliver compelling investment
results for our clients over the long term, supporting them to achieve
their investment objectives. We have a longstanding belief that material
environmental, social and governance (ESG) factors may be an important
driver of long-term investment returns. From our first application of
“avoidance screens” in the early 1940s and the launch of our U.S.
Sustainable Equity team in 1989 to launching our Net-Zero Alignment
Indicator in 2022 Neuberger Berman has been at the forefront of
providing clients with choice.
Our ESG philosophy clearly distinguishes between process-focused
investing and outcome-focused investing. Our ESG-Integrated strategies
are process-focused, which means that we consider financially
material ESG factors as one investment input alongside many other
traditional factors. This could enable our identification of key risks that
individual issuers may face in the near term or over the long haul. As an
active manager, we believe this is not inconsistent with our duties as
a fiduciary and may in fact be required to fulfill those duties in certain
markets. We also recognize that many clients desire a more outcomes-
based approach, which is why we also offer outcome-oriented strategies
which are appropriately labeled in the product name, for example by
using the term “sustainable” or “impact”. This allows clients to make an
informed, conscious decision to invest in those strategies.
Today, we continue to innovate, driven by our commitment to our clients
and their choices. We also continue to deepen the robustness of our
proprietary, analyst-led insights and engagement efforts across process-
focused and outcome-focused investment strategies in order to best serve
our clients.
WE CONTINUE TO INNOVATE, DRIVEN BY OUR
COMMITMENT TO OUR CLIENTS AND THEIR CHOICES.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 JONATHAN H. BAILEY
Global Head of ESG and
Impact Investing
“ It is an honour to be entrusted with the
precious capital of clients from around
the world. Our clients have diverse
portfolio objectives—from managing
material financial risks, to seeking specific
environmental or social outcomes. Some
wish to align their portfolio with a net-zero
transition or to invest in companies that help
41
save lives. We are committed to offering
clients the choice for how they wish their
capital to be invested.”
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 Evaluating Net-
Zero Alignment
For some of our clients, the transition risk and potential climate impact of their portfolio is an increasingly
important consideration in conjunction with investment performance.
We partner to
create tailored
solutions for
clients on their
journey to
Net Zero
42
For specific accounts where clients have
asked us to set net-zero goals, we take a
client-centric approach and work with them
on define specific targets. We also manage
specific “sustainable” and “impact” labelled
co-mingled funds that have affirmed their
net-zero intent, consistent with their stated
objectives and strategies, and fully disclosed
in the relevant fund documentation. We
believe investing with the goal of net-zero
alignment requires a high-quality analytical
and engagement-focused approach.
As active managers, we strongly believe
that ESG analysis should incorporate analyst
judgment. While backward-looking indicators
such as carbon footprint and carbon intensity
are important to track, they only provide a
partial picture of each company and sector’s
unique net-zero journey.
To better capture real-time insights, we
designed
forward-looking Net-Zero
Alignment Indicator that seeks to capture a
a
company’s current status and progress over
time toward net-zero targets.
The Net-Zero Alignment
Indicator was
created in partnership with our clients with
decarbonization targets and
incorporates
specific sub-indicators that were informed by
the high-level expectations of the Institutional
Investor Group on Climate Change (IIGCC).
The indicator utilizes multiple quantitative
data points from both traditional ESG data
providers and specialized climate data sets, as
well as real-time insights from our both our
credit and equity research analysts. This allows
us to undertake more targeted stewardship in
areas where a company is making less prog-
ress toward net-zero alignment. As a result,
it creates a positive feedback loop: research
analysts and portfolio managers can conduct
engagements on the weakest sub-indicators,
and the company’s responses can be fed back
into the indicator to enhance our insights.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 forward-looking Net-Zero Alignment
Our
Indicator is:
• Adaptable by allowing for the constant
addition of new factors and data sources, as
well as allowing qualitative analyst overrides
• Sector-specific with the ability to build
custom models with sector-specific data
points
• Integrated throughout our ESG Investing
platform to support engagement and new
product development.
In addition to our Net-Zero Alignment
Indicator, Neuberger Berman is committed to
understanding our climate-related risks and
opportunities and managing risks that are
material to our business. We have implemented
top-down scenario analysis for modelling
transition and physical risks at the company
level. This scenario analysis currently focuses
on our listed public equity and corporate-issuer
fixed income holdings in the firm’s U.S. mutual
funds and international UCITS range. The
portfolio analytics output helps us understand
the Climate Value-at-Risk (“CVaR”).1
Through the development and application of
tools such as our Net-Zero Alignment Indicator
and top-down scenario analysis, we have the
ability and experience to meet client decarbon-
ization goals through investment solutions such
as climate-integrated strategic asset allocation,
climate impact and climate transition.
1 Climate VaR is defined as the present value of
aggregated future policy risk costs, technology
opportunity profits, and extreme weather event
costs and profits, expressed as a percentage of a
security or portfolio’s market value along various
global-warming pathways: 1.5°C of warming,
2.0°C of warming, or more.
43
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 SPOTLIGHT
The High Yield Team’s
SDG Engagement
Leveraging Our Robust Engagement Platform
The Neuberger Berman High Yield team invests in short-duration U.S. high
yield fixed income securities and engages with issuers based on the UN
Sustainable Development Goals (SDGs) in seeking investment returns and
a positive social and environmental impact.
knowledge sharing. This past year, we guided issuers on which ESG issues
we believe are most material to their business and operations, worked
with them to measure and publicly disclose ESG data, and directed them
to establish objectives with the aim of contributing to the UN Sustainable
Development Goals.
44
We believe consistent engagement with issuers can result in effective
dialogue and ultimately provide a greater probability of successful
outcomes. Such engagement also helps build long-term relationships
between our research team and managements. We leverage our deep
research capabilities on a global basis to access both public and private
issuers. Approximately 30% of U.S. high yield issuers are privately owned1
and not commonly reached by investors. We believe that our access to
these issuers provides a unique platform within fixed income markets.
The team sets engagement objectives for each issuer with the intention
of driving change, in a process that often starts with education and
Determining Engagement Potential
Our research and ESG Investing teams collaborate on engagement
objectives aimed at amplifying each issuer’s contribution to the UN
SDGs. We closely monitor our engagement activity for progress toward
objectives with a multistage tracking system.
The opportunity for engagement is critical in deciding whether to
purchase an issuer. If an existing holding fails to meet our ESG goals
within two or three years, the investment team will consider divestment.
OUR ACCESS TO PRIVATE ISSUERS PROVIDES
A UNIQUE PLATFORM WITHIN FIXED INCOME
MARKETS
1 J.P. Morgan.
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
NB Engagement Potential Indicator
1
2
3
4
5
Unwilling or Unable
to Engage
Some Willingness
and Ability to Engage
Willing to Engage
and Aware of ESG
Willing to Engage
and Aware of SDGs
Willing to Engage on
Becoming an SDG Leader
We Engage on a Diversified Set of Objectives That Aim to
Achieve Incremental Contributions to Specific UN Sustainable
Development Goals (SDGs)
45
Seek to Generate Consistent,
Diversified Current Income
With Lower Interest-Rate
Sensitivity
Beyond contributing to the UN SDGs, our
High Yield team presents what we consider
a compelling fundamental investment
opportunity:
1. Lower Duration: Offers a comparable yield
with much lower duration than other fixed
income sectors
2. Durable Income: Historically delivered
stable realized income with consistent
downside mitigation
3. Benign Default Outlook: Suggests
investors are more than compensated for the
low default risk
We are encouraged by our continued
partnership with issuers and look forward to
continuing to guide them on a sustainable
path forward.
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
1.0%24.6%**2.1%1.5%22.1%*9.2%1.5%9.7%1.0%2.1%3.6%1.5%4.1%15.9% THE VOICE OF THE CLIENT
Leading Sustainability
in Asia
46
AIA Group is the largest independent, publicly listed pan-Asian life insurance group with a total asset of
more than $300bn and underwriting more than 40 million individual insurance policies across the region.
We spoke to AIA Group’s Head of Sustainable Investment Chi Zhang about building an ESG Strategy and
helping to achieve the net-zero transition in high carbon economies.
AIA launched its formal ESG Strategy in March 2021—but really
that was about recognizing what was already being done and
formalizing it to build the foundation for the steps AIA is taking
now. Can you tell us about AIA’s journey to this point?
Chi Zhang:
We have always recognized the importance of environmental, social and
governance (ESG) factors to managing risk for our stakeholders within our
general account investment portfolio. Our analysts have been integrating
them into our investment process for many years, using both in-house
research and specialist third-party data. We started to formalize these
processes six or seven years ago. Our first ESG report was published
in 2017. We signed up to the Task Force on Climate-related Financial
Disclosures (TCFD) in 2018, and we were one of the first Asian signatories
to the United Nations-backed Principles for Responsible Investment (PRI)
in 2019.
Our formal ESG strategy has five priorities: Deepening ESG engagement;
Augmenting ESG training and capacity; Embedding ESG considerations;
Reviewing portfolio exclusions; and Carbon disclosing our portfolio.
As part of the fifth priority and our net-zero commitment, in 2021 we
began drawing up our plan to submit emission-reduction operational
and investment near-term targets to the Science-Based Targets initiative
(SBTi) by this year, 2023. We shall disclose the total financed emissions
for all listed equities, and bonds issued by listed entities, whether held
directly by AIA in-house or via managed accounts with our external asset
managers, and for real estate and power generation project finance within
our general account investment portfolio, which aligns with the SBTi and
TCFD disclosure requirements. Additionally, as recommended by TCFD,
we shall disclose the weighted average carbon intensity (WACI) of our
directly managed listed equity portfolio, although we do not have stated
commitments or targets in relation to WACI.
Signing the PRI in 2019 was the main catalyst to develop our ESG Rating
Scorecard and our full corporate engagement program within our general
account investment portfolio. We consulted with many of our external
asset managers on how to build effective ESG scoring processes, and
had our process reviewed and validated by an external party before
rolling it out to 100% of the assets we directly manage in-house within
our general account investment portfolio in 2022. That includes both
equity and bond issuers; and corporates, governments, agencies and
government-like entities. Around 80% of our investment assets are fixed
income and almost half of that is government-issued, so that coverage
is important.
We developed distinct Scorecards for corporates and for governments,
as well as a Scorecard designed specifically to assess external asset
managers on their ESG frameworks and processes. For example, how do
they incorporate ESG factors into investment decisions? Do they have
a dedicated stewardship team, or do they engage through their sector-
specialist analysts?
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 Leading Sustainability
in Asia
You have committed, under the SBTi
methodology, that 100% of your in-
scope general account
investment
portfolio—listed equities and bonds
issued by listed entities—will have
science-based targets by 2040. How
realistic is that for a portfolio weighted
toward Asian issuers?
Even in Asia, where progress has been slower,
thinking about net-zero and engagement
on emissions has gained momentum across
sectors. Ultimately, however, it’s about critical
mass. If 25 – 30% of a sector commit and
sign up to a framework, as we see in Europe,
the others begin to be perceived as laggards
and momentum picks up. Asia is made up
of a lot of countries with diverse economies
and agendas, and that makes the SBTi 2040
target a challenge. To be fair, this is not only
an issue in Asia: a lot of our Asia portfolio
is in out-of-scope government securities, so
our engagement with asset managers on this
issue is often on European and U.S. corporate
bonds—and there is still quite a lot of work to
be done there to raise awareness, especially
among U.S. issuers.
invest
AIA does not
in cluster
munitions, and it has excluded tobacco
manufacturing since 2018 and coal
mining and coal-fired power generation
since 2021. Coal was excluded from
the directly managed general account
portfolio seven years ahead of schedule.
AIA Group spoke with Neuberger Berman on February 14, 2023.
How does AIA think about the role of
exclusion in sustainable investing?
last
is always a
Exclusion
resort and
engagement is always our priority. To achieve
net-zero, for example, we need the big fossil-
fuel and utility companies to transition. It’s
impossible simply to shut them down and
redesign our energy infrastructure from a
blank page. That said, as long-term investors,
we need to make a call as to whether a
security that we intend to hold for decades
presents acceptable risks. We believe that
holding the bonds of a coal-fired power utility
in 20 years’ time would present a bigger
risk to our balance sheet than, for example,
not holding them during 2022. The coal
sector is particularly vulnerable to stranded-
asset risk and it also comes with substantial
reputation risk. We worked closely with our
asset managers on the feasibility of exclusion,
and because most of the holdings were liquid,
we were able to move more quickly than
expected. For a portfolio with a lot of Asia
exposure, that has made quite a difference:
the carbon footprint of our directly managed
listed equities has been reducing, and a large
part of that is due to the coal exclusion.
Exclusion is only one side of the sustainable
investment story. The third priority in our ESG
Strategy is Embedding ESG considerations.
We have implemented a bottom-up approach
mandating the consideration of ESG factors,
and such assessment has been refined and
quantified in the ESG Rating Scorecard. As
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
47
we applied this approach, it not only led
us to exclude coal, but also to grow our
investment in renewables, from $400mn to
$1.6bn between 2020 and 2021 alone.
look for
What balance does AIA
between impact and financial risk and
return, when it comes to sustainable
investments?
We define sustainable investment as having
a positive estimated long-term risk and
return contribution, and therefore we see it
sitting between impact and ESG-integrated
investment. Our first obligation, as embedded
in our Investment Mission Statement, is to
make investments that can deliver value to our
stakeholders and policyholders by “consistently
and significantly impacting the long-term
financial results of AIA and its customers by
driving sustainable outcomes and behavior.”
We are a provider of long-term life and health
insurance products, however, and therefore we
regard limiting our exposure to stranded-asset
risk, for example, as materially important as
well as being important for environmental and
social sustainability.
We also see ourselves as part of this
sustainability effort. Last year, our ESG Report
had the title, “Sustaining Healthier, Longer,
Better Lives.” We believe that helping our
policyholders manage
long-term
healthcare costs and their families’ other
financial risks has a positive social impact.
their
ANNUAL REPORT – JUNE 2023
Getting to
Know Us
2022 Firm
Stakeholder Metrics
CLIENT PORTFOLIO METRICS
2018
Teams with access to environmental, social and governance (ESG) research
100%
2019
100%
2020
100%
2021
100%
2022
100%
Shareholder meetings voted (#/%)
4,894/99%
4,738/100%
4,774/100%
4,645/99%
4,900/98%
TOTAL NUMBER OF ENGAGEMENT MEETINGS WITH CORPORATE MANAGEMENT TEAMS
Number of equity engagements held
Number of credit engagements held
% AUM engaged (public equity)
Percentage of UCITS and mutual funds with 3+ Globes on
Morningstar Sustainability Ratings
50
1,324
1,728
N/A
50%
1,173
901
N/A
73%
2,213
1,453
71%
3,162
1,463
78%
3,439
1,254
85%
68%
76%
83%
COMMUNITY METRICS
EMPLOYEE METRICS
Corporate charitable giving, $ Millions
(foundation, gift matching, disaster relief)
Total full-time employees, globally
2018
2019
2020
2021
2022
2.55
2.96
2.85
2.41
3.07
2,036
2018
2,178
2019
2,305
2020
2,411
2021
2,657
2022
COMMUNITY METRICS
2018
2019
2020
2021
2022
Corporate charitable giving (foundation, gift matching, disaster relief)
$2,553,479
$2,965,108
$2,852,968
$2,415,357
$3,071,604
FIRM-SPONSORED VOLUNTEERISM1
Employee volunteer hours
Employee volunteer participation (#) (not unique)
Unique volunteer participation
Firm and regional headquarter locations participating in volunteerism2
Number of projects
BENEFICIARIES
Organizations reached through giving
Organizations reached through volunteerism
5,738
1,861
64%
100%
166
752
111
5,759
1,833
58%
100%
147
614
115
323
147
6%
100%
26
780
21
750
300
13%
75%
35
575
30
4,000
1,324
40%
100%
112
744
97
51
Number of children/youth/students impacted through giving and volunteerism
496,557
1,176,025
563,499
675,000
985,000
Number of employees sitting on charitable boards
Number of adverse final judgments in legal proceedings
relating to marketing communications of investment products
407
0
246
0
317
0
317
0
317
0
1 COVID-19 restrictions limited our employees’ capacity to engage in volunteer activities since 2020.
2 The Tokyo Office was not able to participate in volunteerism in 2021 due to COVID-19 restrictions.
Note: Neuberger Berman is not currently publishing information regarding assets under management for strategies that integrate financially material ESG factors into their
investment process while it continues to monitor the developing regulatory standards globally.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 EMPLOYEE METRICS
2018
2019
2020
2021
2022
GLOBAL
Total employees, full-time
Total employees, part-time
Senior investment professional retention rate (MD/SVP)
Employees with access to benefits (full-time)
Percentage of firm owned by employees3
2,036
44
95%
100%
100%
2,178
43
95%
100%
100%
2,305
40
97%
100%
100%
2,411
32
98%
100%
100%
2,657
35
97%
100%
100%
Employees with firm ownership (#/%)
~500/~25%
~500/~24%
~550/~23%
~575/~24%
~650/~24%
Portfolio Managers whose compensation is tied to multi-year performance
Employees with access to skills-based training
Employees with access to promotion opportunities
Employees with access to educational assistance
52
STAFF DIVERSITY (WOMEN %)
Total staff
Senior staff (VP+)
New hires (% women, three-year average)
U.S.
Total U.S. employees
Employees with 15% 401K firm contribution (no required match or vesting)
STAFF DIVERSITY (ETHNIC MINORITY %)
Total staff
Senior staff (VP+)
Ethnic minority hiring (% of new hires, 3-year average)
100%
100%
100%
100%
35%
26%
39%
1,578
99%
29%
20%
35%
100%
100%
100%
100%
37%
28%
40%
1,690
99%
31%
22%
38%
100%
100%
100%
100%
37%
28%
40%
1,732
99%
31%
21%
39%
100%
100%
100%
100%
38%
29%
42%
1,777
98%
34%
24%
45%
100%
100%
100%
100%
39%
31%
43%
1,930
98%
34%
26%
45%
3 Includes the firm’s current and former employees, directors and, in certain instances, their permitted transferees.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 ENVIRONMENTAL METRICS4
2018
2019
2020
2021
2022
GLOBAL
Employees using public transportation
GHG emissions from business travel (Metric tons CO2e)
GHG emissions offset from estimated global travel
NY HEADQUARTERS
Square footage as percentage of total global office space
LEED certifications
Total energy used (gigajoules)
Electricity used (gigajoules)
Steam used (gigajoules)
GHG emissions from energy used (Metric tons CO2e)
Total water used (million gallons)
Waste recycled (diversion rate)
88%
5,500
100%
64%
Silver
40,430
13,449
26,991
2,773
8.6
47%
89%
5,000
100%
58%
Silver
43,003
13,842
21,092
2,008
8.4
53%
10%
889
33%
559
100%
100%
57%
Silver
38,362
19,552
18,810
2,369
6.5
59%
63%
Silver
38,315
19,020
19,296
2,347
5.9
59%
75%
2,368
100%
61%
Silver
39,578
19,478
20,101
2,418
7.3
59%
53
Note: As an employee-owned private firm, this report is not intended as a communication to investors, however the Sustainability Accounting Standards Board (SASB)
standards for Asset Management & Custody Activities have helped inform this report. The SASB disclosure topics below align closely with our stakeholder metrics as noted.
1. Transparent Information & Fair Advice for Customers
i) Number of adverse final judgments in legal proceedings relating to marketing communications of investment products
2. Employee Diversity & Inclusion
i) Global staff diversity metrics
ii) U.S. staff diversity metrics
3. Incorporation of Environmental, Social and Governance (“ESG”) Factors in Investment Management & Advisory
i) Total number of engagement meetings with corporate management teams, including equity and credit
4 Prior to 2020 Neuberger Berman reported on the portion of the building’s energy use controlled by the firm. Starting in calendar year 2020 and forward, Neuberger Berman
updated its energy reporting to also include our portion of common energy and utility consumption within the building.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023
$427
$460
$405
$356
2022 FINANCIAL HIGHLIGHTS
Summary Financial Information
(U.S. Dollars in Millions)
Assets Under Management
(U.S. Dollars in Billions)
Assets
Cash and Cash Equivalents (includes $1.9mn of segregated cash)
$947.5
2022
Investments
Receivables
$465.0
Goodwill and Other Intangibles
TOTAL
ASSETS
$3,169.6
$739.7
54
TOTAL
LIABILITIES
$2,631.8
Right-of-use Assets
Other Assets
$187.5
Liabilities
Senior Notes Payable
Lease Liability
$410.2
$419.6
$598.5
$531.2
Accrued Compensation and Benefits
Accrued Expenses and Other Liabilities
$800.2
$701.9
TOTAL
LIABILITIES
AND EQUITY
$3,169.6
Equity1
$537.8
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
$304
$295
$255
$240
$250
$242
$205
$193
$190
NET REVENUES $2,139.2
1 Equity includes $91.8mn of non-controlling interests from
employee investments held directly by employees.
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023 BOARD MEMBERS
George H. Walker
Chairman and Chief Executive
Officer, Neuberger Berman
Grainne Alexander
Independent Non-Executive
Director of the Board
Formerly Chief Executive, F&C
Management (F&C Ireland)
Joseph V. Amato
President, Neuberger Berman;
Chief Investment Officer—
Equities
Sharon Bowen
Director, Intercontinental
Exchange, Inc.
Michael J. Cosgrove
Formerly Executive,
General Electric Company
and Trustee, GE’s Pension
and Benefits Plan
Robert W. D’Alelio
Portfolio Manager, Small Cap
Naomi Daly
Independent Non-Executive
Director of the Board
Formerly Independent
Director and Senior
Executive, MPMF Fund
Management (Ireland) Limited
Michele Docharty
Independent Director,
Neuberger Berman Group
Formerly Partner, Goldman Sachs
Alexander J. Duncan
Director, Operations and
Infrastructure,
Neuberger Berman
Tom Finlay
Independent Non-Executive
Director of the Board
Formerly Bank of Ireland
Asset Management
Formerly a Barrister by
profession
Marc Gary
Formerly Executive Vice
President and General
Counsel, Fidelity Investments
Martha C. Goss
Formerly Corporate
Treasurer and Enterprise Risk
Officer, The Prudential
Insurance Company
of America
Michelle S. Green
General Counsel of EMEA and
Latin America,
Neuberger Berman
Steven A. Kandarian
Formerly Chairman, President
and CEO, MetLife
Formerly Executive Director,
Pension Benefit Guaranty
Corporation (PBGC)
55
Michael M. Knetter
President and CEO, University
of Wisconsin Foundation
Formerly Dean, School of
Business, University of
Wisconsin
Deborah C. McLean
Adjunct Professor,
Columbia University
School of International
and Public Affairs
George W. Morriss
Formerly Executive Vice
President and CFO, People’s
Bank, CT
Tom D. Seip
Independent Non-Executive
Chairman of the Board
Formerly Senior Executive,
The Charles Schwab
Corporation
James G. Stavridis
Operating Executive,
The Carlyle Group
Formerly Admiral,
United States Navy
Richard B. Worley
Founder, Managing Director
and Partner, Permit Capital
Group, LLC
Formerly CEO and CIO,
Morgan Stanley Investment
Management
Board of Directors
UCITS Board
‘40 Act MF Board
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023
COMMITTEE MEMBERS
Joseph V. Amato
Robert J. Arancio
William A. Arnold
Irina Babushkina
Jonathan H. Bailey
Shrinkhala K. Basnet
Ashok K. Bhatia
William A. Braverman
Anne F. Brennan
David M. Brown
Brad E. Cetron
Kevin S. Cho
José R. Cosio
Timothy F. Creedon
56
Patrick S. Deaton
Kenneth M. deRegt
Anthony M. DeSantis
Henry F. Detering
Rob J. Drijkoningen
Margaret E. Gattuso
Barry J. Giarraputo
Jason C. D. Henchman
Charles C. Kantor
Matthew W. Kaplan
Scott E. Kilgallen
Erik L. Knutzen
Andrew S. Komaroff
J. Douglas Kramer
Operating Committee
Partnership Committee
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023
COMMITTEE MEMBERS
Jennifer L. Laird
Paul W. Lanks
Jacques G. Lilly
Patrick Liu
Patrick C. Lomelo
Stephanie B. Luedke
Joseph P. Lynch
Matthew H. Malloy
Lesley D. Nurse
Ryo Ohira
Hirotaka Okada
David R. Pedowitz
Eli M. Salzmann
Marvin C. Schwartz
57
Jonathan D. Shofet
Andrew M. Silberstein
Gregory G. Spiegel
David S. Stonberg
Brad C. Tank
Anthony D. Tutrone
Dik van Lomwel
Francis Verdier
Peter Von Lehe
George H. Walker
Sean Williamson
Stephen G. Wright
Hugo Yan
Heather P. Zuckerman
Operating Committee
Partnership Committee
NEUBERGER BERMAN ANNUAL REPORT – JUNE 2023
ESG COMMITTEE MEMBERS
Joe V. Amato
Jonathan H. Bailey
(Chair)
Ashok K. Bhatia
Hendrik-Jan Boer
Anne F. Brennan
David M. Brown
Timothy F. Creedon
Tully S. Cheng
Rob J. Drijkoningen
Daniel P. Hanson
James Iselin
Corey A. Issing
Maura E. Reilly
Kennedy
Erik L. Knutzen
Keita Kubota
Richard S. Nackenson
58
Lesley D. Nurse
Joana Rocha Scaff
Jennifer N. Signori
Dik van Lomwel
Stephen G. Wright
Rachel Young
ESG ADVISORY COUNCIL MEMBERS
Vijay Advani
Former Executive Chairman
of Nuveen, the Investment
Management arm of TIAA, and
current Chairman of the U.S.-
India Business Council Global
Board of Directors
Ben Caldecott
Director, Oxford Sustainable
Finance Program & Founding
Director of the UK Centre for
Greening Finance & Investment
Ingrid S. Dyott
Former Co-Portfolio Manager
of Core and Sustainable Equity
strategies for Neuberger Berman
and current Chair of the Board
of Arbor Rising
Mindy Lubber
President and CEO of Ceres,
a sustainability focused
nonprofit organization based
in Boston, MA
George Serafeim
Charles M. Williams Professor
of Business Administration and
Chair of the Impact-Weighted
Accounts Project at Harvard
Business School
Theresa Whitmarsh
Former Executive Director of the
Washington State Investment
Board and Chair of the Board of
Directors, FCLT (Focusing Capital
on the Long Term) Global
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
NEUBERGER BERMAN FOUNDATION BOARD MEMBERS
The Neuberger Berman Foundation (NBF) partners with nonprofits globally that provide
support services to at-risk and underserved children and youth, from birth to early adulthood.
Our grantees support their children and families through programs that include academic
support, workforce development, healthcare, housing and food security, and after-school
programming. In addition to funding, we support our partners by leveraging the time and
talent of our employee volunteers and leaders.
Maria Angelov
Senior Vice President, President,
Neuberger Berman Foundation
Chrystelle M. Charles-Barral
Managing Director, Head of
Investment Risk EMEA & Asia
Brian C. Jones
Managing Director, Portfolio
Manager, REIT Group
Jennifer L. Laird
Managing Director, Global
Head of Client Service &
Client Reporting
David R. Pedowitz
Managing Director, Senior
Portfolio Manager, Bolton Group
(and Foundation Treasurer)
59
Allison J. Saloy
Managing Director,
Relationship Manager,
Broker Dealer NBIA
Sean Williamson
Managing Director, Head of
Employee Platform
Stephen G. Wright
Managing Director, Head of
Operational Risk & AMGO
Patricia Miller Zollar
Managing Director, Private
Equity
Heather P. Zuckerman
Managing Director, Chief
of Staff
Associate Board Members:
Gregg Angelillo
Evelyn Chow
Michelle Bernal-Silva
Pete D’Onofrio
Tokufumi Kato
Manuel Lorenzo
Leila Biederman
Dominique Drenckhahn
Jackie Regan
Chris Bokosky
Karen Boyne
Grace Chmiel
Rob Gephardt
Ernest Gyasi
Vera Karsteva
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
NEUBERGER BERMAN’S PRI ASSESSMENT SCORES
In our 2021 PRI Assessment, we obtained the highest possible scoring1 across all categories for our approach to ESG for the third year in a row.
In the current reporting cycle, the PRI adopted a new, more stringent assessment methodology. Neuberger Berman earned 5 Stars across every asset
category in which it reported and rated above the median in every category. In addition to scoring the best possible ranking across all asset classes, the
firm also obtained the highest possible score in PRI’s new private debt category and its overarching Investment & Stewardship Policy category.
Investment & Stewardship Policy
DIRECT
Listed Equity – Active Quantitative – Incorporation
Listed Equity – Active Fundamental – Incorporation
60
Listed Equity – Voting
Fixed Income – SSA
Fixed Income – Corporate
Fixed Income – Securitized
Fixed Income – Private Debt
INDIRECT
Private Equity
NEUBERGER
BERMAN
2021
MEDIAN OF ALL
REPORTING SIGNATORIES
1 For illustrative and discussion purposes only. PRI grades are based on information reported directly by PRI signatories, of which investment managers totaled 3,404 for 2021,
1,924 for 2020 and 1,119 for 2019. Note that scores for the 2021 reporting cycle cannot be compared to previous years due to the change in PRI assessment methodology
and framework. Unlike previous years, the indicator scores are assigned one of five performance bands (from 1 to 5 stars) instead of six performance bands (from A+ to E).
All PRI signatories are eligible to participate and must complete a questionnaire to be included. The underlying information submitted by signatories is not audited by the
PRI or any other party acting on its behalf. Signatories report on their responsible investment activities by responding to asset-specific modules in the Reporting Framework.
Each module houses a variety of indicators that address specific topics of responsible investment. Signatories’ answers are then assessed and results are compiled into
an Assessment Report. The Assessment Report includes indicator scores, summarizing the individual scores achieved and comparing them to the median; section scores,
grouping similar indicator scores together into categories (e.g. policy, assurance, governance) and comparing them to the median; module scores, aggregating all the indicator
scores within a module to assign one of six performance bands (from E to A+). Neuberger Berman pays a fee to be a member of PRI and the grades are only available to
PRI members. Ratings referenced do not reflect the experiences of any Neuberger Berman client and readers should not view such information as representative of any
particular client’s experience or assume that they will have a similar investment experience as any previous or existing client. Awards and ratings are not indicative of the
past or future performance of any Neuberger Berman product or service. Moreover, the underlying information has not been audited by the PRI or any other party acting on
its behalf. While every effort has been made to produce a fair representation of performance, no representations or warranties are made as to the accuracy of the information
presented, and no responsibility or liability can be accepted for damage caused by use of or reliance on the information contained within this report. Information about PRI
grades is sourced entirely from PRI and Neuberger Berman makes no representations, warranties or opinions based on that information.
To read more about Neuberger Berman’s Historical PRI Assessment Scores, please visit nb.com.
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
N E U B E R G E R B E R M A N A N N U A L R E P O R T – JUNE 2023
All information is as of December 31, 2022 unless otherwise indicated. Firm data,
including employee and assets under management figures, reflect collective data
for the various affiliated investment advisers that are subsidiaries of Neuberger
Berman Group LLC (the “firm”). Firm history and timelines include the history
and business expansions of all firm subsidiaries, including predecessor entities
and acquisition entities. Investment professionals referenced include portfolio
managers, research analysts/associates, traders, product specialists and team-
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buy, sell or hold a security. This material is general in nature and is not directed
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This material may not be used for any investment decision in respect of any U.S.
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not be relied upon as a basis for making an investment decision. ESG factors are one
of many factors that may be considered when making investment decisions.
Barron’s “Best Fund Families of 2022” measures one-year results of 49 fund families.
Neuberger Berman was ranked 10th and 32nd in the 5- and 10-year categories
respectively. To qualify for the Lipper/Barron’s Fund Survey, a group must have at least
three actively managed mutual funds or active exchange-traded funds in Lipper’s
general U.S.-stock category, as well as one in world equity and one mixed asset such
as a balanced or allocation fund. Fund shops also must have at least two taxable-
bond funds and one national tax-exempt bond fund. All funds on the list must have a
track record of at least one year. The rankings also include “smart beta” ETFs, which
are run passively but are built on active investment strategies. Each fund’s returns
are adjusted for 12b-1 fees, which are used for marketing and distribution expenses.
The funds usually add these fees back into returns. Lipper/Barron’s aim is to measure
the manager’s skill. Fund loads, or sales charges, aren’t included in the calculation of
returns, either. Each fund’s return is measured against those of all funds in its Lipper
category, such as, say, small-cap value. That leads to a percentile ranking, with 100
the highest and 1 the lowest, which is then weighted by asset size, relative to the
fund family’s other assets in its general classification-world equity, for instance. If a
family’s biggest funds do well, that boosts its overall ranking. Poor performance in a
big fund obviously has a big effect on the ranking. Finally, the score is multiplied by
the weighting of its general classification, as determined by the entire Lipper universe
of funds. The category weightings for the one-year results: general equity, 36.1%;
mixed asset, 22%; world equity, 16%; taxable bonds, 21.5% and tax-exempt bonds,
4.5% (weightings might not add up to 100% because of rounding).
The Russell 1000 Index is a float-adjusted market capitalization-weighted index
that measures the performance of the large-cap segment of the U.S. equity market.
It includes approximately 1,000 of the largest securities in the Russell 3000 Index
(which measures the performance of the 3,000 largest U.S. public companies based
on total market capitalization). The index is rebalanced annually in June.
The United Nations Sustainable Development Goals (UN SDGs) are a common set
of social and environmental outcomes that governments, nonprofits, companies and
investors can work together to achieve.
This material is being issued on a limited basis through various global subsidiaries
and affiliates of Neuberger Berman Group LLC. Please visit www.nb.com/disclosure-
global-communications for the specific entities and jurisdictional limitations and
restrictions.
The “Neuberger Berman” name and logo are registered service marks of Neuberger
Berman Group LLC.
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