Environmental Finance's Bond Awards 2022

Nuveen's impact writ large

Nuveen's inaugural Global Fixed Income impact report won the Impact report of the year award. Lead portfolio manager Stephen Liberatore explains the investment firm's approach to measuring impact in public fixed income

Environmental Finance: What's your approach to impact investing in the fixed income asset class?

Stephen Liberatore: Our approach is very simple. We are looking for securities that have a direct and measurable social and/or environmental outcome. That means we're very focused on use-of-proceeds bonds, securities that allow us to understand how proceeds are utilised, and ultimately collect meaningful data on the real-world outcomes that were funded from the transaction. We are intensely focused on disclosure, with the key elements being relevant KPIs that accurately measure outcomes, as well as the frequency and transparency of reporting. Critically, an issuer must be willing and able to publish impact reporting we can trust as evidence of outcomes.

EF: This is the first impact report for the entirety of your global fixed income impact portfolios, but you've been producing impact reports since 2016. How has your approach to impact reporting evolved?

Stephen LiberatoreSL: Initially, we produced what we call 'short form' or summary impact reports at the account level, setting out the impact we achieved in our four thematic areas – affordable housing, community and economic development, renewable energy and climate change, and natural resources – and presenting them in terms of equivalencies that are more understandable to the average investor. (For example, we explain that 240 million megawatt hours of electricity generation powers around 20 million average U.S. homes.)

Since the first set of reports over five years ago, we have added information on the Sustainable Development Goals [SDGs], as more investors have begun to look at impact through that lens, and we've gradually added more granular data. So, for example, in our affordable housing investments, that's evolved from a simple number of housing units to include the type of tenant, area mean income data etc. The explosion of social bonds issued following the Covid pandemic led to an increase in issuers providing quantitative metrics that measured societal outcomes, often times at the urging of our team, which includes co-portfolio manager Jessica Zarzycki and associate portfolio manager Adam Guerino, as we consulted with issuers and underwriters on the KPIs we consider important for evaluating impact.

We've also incorporated metrics related to innovative transactions. We were the lead investor in the Seychelles Blue Bond in 2018, and the World Bank's rhino conservation bond earlier this year. These first-of-their-kind deals unlocked new KPIs we can track over the life of the bond. We've tried over time to ensure our framework remains flexible and gives us the opportunity to look at innovative structures like those.

Our latest report is our first 'long form' or platform-wide publication – which builds on our quantitative approach with more qualitative details and insights. This report reflects the deep collaboration between the global fixed income and responsible investing teams. It's allowed us to talk more about our overall process, to present case studies that provide a really tangible sense of how our clients' capital is being deployed, and to set out some of the harder issues that we face regarding impact reporting.

EF: One of those issues is reporting on carbon data. How are you addressing that challenge?

SL: Carbon intensity is currently typically measured at the level of the parent company, rather than the specific carbon intensity of the project or projects being financed by a particular bond. That skews the results by overstating the emissions that are associated with the investment.

Reporting at the enterprise level instead of at the deal or project level runs the risk of disincentivising investment in renewable energy assets. I would make the argument that if you want a dedicated, intentional ESG or impact strategy, using the current way of looking at parent-level carbon emissions, your portfolio should 'look worse' than the peer group or the index. Otherwise, you're not investing in those sectors where the opportunities to help companies decarbonise really lie. We believe reporting should accurately reflect the investment in the specific asset.

EF: The report covers SDG alignment. What's your approach to measuring impact against the Sustainable Development Goals?

SL: We first created our reporting framework in 2007, well before the SDGs were designed. Fortunately, our approach aligns well with how the SDGs were created. We are quite rigorous in that we restrict our impact reporting to direct impacts, which is in line with the SDGs. So, for example, we have invested in some of IIX's Women's Livelihood Bonds. We report on their direct impacts, such as financial opportunity and financial literacy education. There are also wider benefits associated with those investments, such as on health, family stability etc., but we don't attempt to measure or estimate anything that we are not directly investing towards.

EF: You note that client demands on reporting are constantly evolving. What's next for Nuveen on the impact reporting front?

SL: Our reporting will continue to reflect what we're seeing in the marketplace and the demands of our investors. We certainly want to focus more on metrics around carbon intensity, so they better reflect what an impact portfolio is actually financing. If that is done correctly, it can provide a great visual to an investor to understand that the investments they make in a dedicated, intentional ESG or impact portfolio look materially different than the index or the peer group.


Responsible investing incorporates Environmental Social Governance (ESG) factors that may affect exposure to issuers, sectors, industries, limiting the type and number of investment opportunities available, which could result in excluding investments that perform well.

Nuveen, LLC provides investment advisory services through its investment specialists.

This information does not constitute investment research, as defined under MiFID.