Our Policy Statement

Our Philosophy

Responsible investment and responsible citizenship are core to our duty of responsible service. We believe that caring for employees, living and encouraging mindsets of sustainability, and promoting the well-being of local communities are essential to building an enduring business and delivering strong results to our clients. As fiduciaries entrusted to act in our clients’ best interest, we believe that consideration of material environmental, social, and governance (“ESG”) factors can have an impact on long-term investment performance and, therefore, is a natural and important component of disciplined investment research and management of client portfolios.

Across MacKay Shield’s investment teams, climate-related risks have become an increasing concern as impacts from both physical and transition risks play an important role in regulatory and client concerns. As with other ESG factors, we recognize that climate-related risks can have a significant impact on issuers. Given our long-term investment horizons, climate change and the associated impacts on the environment are considered by our investment teams when assessing the sustainability of a company’s business model and the potential impact on its long-term financial outcomes.
 

OUR JOURNEY

MacKay Shields became a signatory of the Principles for Responsible Investment (“PRI”) in 2016 and has consistently worked on developing internal and collaborative practices in exemplifying the six principles. Since becoming a PRI signatory, MacKay’s journey has evolved by bringing on additional resources in the form of alternative data sets as well as dedicated full-time employees, publicly supporting the Taskforce for Climate-related Financial Disclosures, contributing to industry working groups and thought leadership by our investment professionals, and developing actively managed ESG strategies as we seek to deliver on this mission.
 

OUR COMMITMENT

As part of our commitment to the PRI, we report on our Responsible Investing (“RI”) activities on an annual basis and make the subsequent transparency report available publicly on our website. While we understand that the industry is evolving rapidly, the MacKay approach is driven by our clients as we endeavor to develop disciplines that seek to thoughtfully and intentionally deliver results that align with our clients’ goals and objectives. Furthermore and consistent with Principle 3 of the PRI we actively pursue high standards of disclosure and transparency on material environmental and social risks from the companies in which we invest. We believe engagement is a sensible path to influence best practices and, therefore, prioritize constructive dialogue over exclusion or divestiture to empower outcomes that are more aligned with responsible corporate citizenship. In parallel, we offer transparency on portfolios’ material ESG risks to our clients. Our service commitmment includes bespoke reports including data related to specific RI criterita that align directly to a clients’ objective.

Our Approach

INVESTMENT TEAM AUTONOMY

Each of MacKay Shields’ investment teams utilizes its own distinct process and experience to add value across capital markets, and as such, each investment team considers ESG risk and opportunities alongside traditional factors that reflect the character of each respective asset class and investment style.

In recognizing the wide variance of client goals and objectives, MacKay Shields does not employ firm-level exclusions, screens, or filters for our investment teams outside of various OFAC, EU, and UN sanctions lists. However, each team’s integrated ESG approach can be further tailored to adhere to client-specific restrictions and needs. Rules are coded in our trade order management systems based on these sanctioned lists to identify any potentially sanctioned issues or issuers, which is monitored on a pre- and post-trade basis.
 

STEWARDSHIP

MacKay Shields believes active ownership is an integral part of managing material risks that arise from environmental and social issues, and that maintaining a constructive dialogue with issuers and market participants is the best path to achieving long-term value for our clients. Our investment teams collaborate with companies, trading partners, and industry peers on ESG-related matters in the pursuit of developing knowledge of and sharing ideas about market best practices in risk mitigation. As with our research process, engagements are conducted directly by our analysts and portfolio managers, as we believe they have the experience and deep knowledge to understand and address potentially material pecuniary environmental and social issues with issuers most effectively.

In recognition of the various factors that determine feasibility of desired outcomes, including an issuer’s weight in a portfolio or index, the possiblity of financially material environmental or social risk, an issuer’s relative standing on ESG risk management compared to its peers, and the team’s influence with the issuer and/or influence in their respective markets, each team may determine the most appropriate means for escalation in terms of addressing material ESG risk with issuers. During our engagements we aim to assess an issuer’s awareness and management of what we view to be material pecuniary environmental and social issues and promote better disclosure of said issues, where relevant.

Detailed engagements, with objectives and goals for progress on material ESG issues, are typically reserved for issuers where the position is or has the potential to be sizable, the ESG issue is significantly material to the investment thesis, and the team feels they are positioned well to make meaningful progress with the issuer. In instances where our position size and/or influence with the issuer may result in more limited access to decision-makers, we are more likely to raise any relevant concerns or observations regarding ESG risks and seek to learn more information about an issuer’s aproach to managing ESG risks through constructive dialogue with issuers. Where access is most severely limited yet we still consider an ESG risk to be insufficiently addressed and that risk to be significantly high without commensurate return potential, we may resort to downsizing or divesting from a position. Feedback from our engagements are used to inform each team’s risk profile, and therefore return profile, of an issuer.

Each team has developed a process for conducting engagements that is consistent with its broader investment process and philosophy, which is outlined in the team’s Responsible Investing Policy.

Team-specific Responsible Investing Policies describe each team’s ESG integration process and can be found on our website at https://www.newyorklifeinvestments.com/mackay-shields under “Responsible Investing Policies.”
 

DATA & RESOURCES

In the course of their research and due diligence, the MacKay Shields investment teams may use third party data from a variety of providers. This data serves many functions, including market reference with which they compare their own proprietary research as well as more concrete reliance in terms of data that is specifically material to client investment guidelines. MacKay Shields relies heavily on the use of external providers for emissions data as well as climate scenario analysis in client portfolios where transparency on climate-related risks is a stated investment goal.

The MacKay Shields investment teams are also supported by the Responsible Investment (“RI”) team, which consists of dedicated individuals within the Investment division as well as ESG specialists in the Data and Distribution divisions. The RI team serves to support the investment teams in their pursuit of staying abreast of developing trends and themes within RI, particularly pertaining to regulatory developments and individual client mandates. 
 

GOVERNANCE

Oversight

MacKay Shields’s executive management team and its Board of Managers are responsible for oversight of the firm’s activities, including RI strategy and implementation. To ensure consistency in investment process and outcomes, and that appropriate operational controls are in place, the firm has implemented various governance structures across the its committees and working groups.

More specifically, as it relates to the oversight of RI matters, the following committees guide our efforts:

• The Responsible Investment Advisory Committee (“RIAC”) is charged with overseeing our commitments as a signatory to the Principles for Responsible Investment and firm wide RI initiatives. The RIAC is co-chaired by our Co-Heads of RI, and is comprised of executive leadership from Legal, Compliance, Investments, and Distribution. The RIAC meets at least bi-annually with the following objectives:  
   

- Discuss current and new ways to approach and enhance ESG integration within investment teams and across the firm 

- Share information and ideas on ESG research, trends, and regulatory developments 

- Discuss the application and viability of new and existing third party ESG products and tools to support internal efforts 

- Promote ongoing RI training and education 

- Oversee authenticity in deliverance of RI value proposition for our clients 

• The Enterprise Risk Oversight Committee is charged with monitoring the risks of the firm’s investment and operations activities. Its responsibilities include assisting in setting and reviewing guidelines and policies by which risk management is addressed throughout the organization. The Investment Activities Sub-Group of this Committee periodically reviews exposures to various climate related-risks across investment teams. As necessary, issues are discussed with investment teams and reported to the the firm’s executive management team and Board of Managers.

Education

Additionally, at MacKay Shields we know that continued learning is a crucial element in developing sophisticated RI strategies. As environmental and social issues emerge and grow in complexity, with fragmented regulatory oversight of them across various markets, seeking and providing continuous edification is a priority of the RI Team and ESG champions throughout our business.

• The Responsible Investment Working Group (“RI Working Group”), a sub-group of the RIAC, meets monthly and is comprised of executives, investment professionals, and other staff, and is led by the Co-Heads of RI. The group is tasked with collectively monitoring each team’s ESG and engagement processes, so that a consistent standard is being driven through MacKay Shields investments. In addition, the group is also responsible for sharing experiences and best practices learned from continued client and issuer engagement, as well as approving updates to the firmwide RI Policy. 

• The ESG Forum is a quarterly town hall led by the Co-Heads of RI and open to professionals from all areas of MacKay Shields’ business. The purpose of the ESG Forum is to share industry trends, regulatory updates, and RI developments at MacKay Shields and to provide a platform to discuss the implications of all on our business and our clients. The ultimate aim of the ESG Forum is for educational awareness of the ESG market landscape, as well as to promote consistency in understanding and messaging of MacKay Shields’ RI efforts

Compliance & Data Management

We understand the complexities involved in implementing sophisticated and transparent responsible investment strategies. Due to the fractured and novel nature of much of the data available to measure and track environmental and social issues, ESG data quality assurance will remain a central focus for MacKay Shields as we aim to ensure sound data integrity both for our investment professionals and our clients. In addition, our Compliance team works in collaboration with our RI Team to conduct internal reviews of each team’s processes in order to encourage consistent process implementation and appropriate documentation. To strengthen these efforts, MacKay Shields will continue to develop and enhance our centralized data tracking and monitoring system that all teams use to house their proprietary ESG assessments and engagement notes. 

AN ONGOING COMMITMENT

In efforts to promote Principle 5 of the PRI, our professionals have contributed to PRI-led white papers on ESG in specific asset classes, co-authored multiple ESG papers that are part of the CFA curriculum (Levels 1 and 2), are actively involved in industry working groups such as the Credit Roundtable and the CFA Institute’s Standards of Practice Council, and participate in ESGfocused investment panels and webinars. Further collaboration takes place within the broader network of boutiques of New York Life Investment Management. RI representatives from New York Life Investment Management and each of its various asset management boutiques meet on a monthly basis to discuss relevant trends and ESG developments at our respective firms.

We are committed to continually strengthening and refining our approach to Responsible Investing and commitment as a PRI signatory. We understand that the work of becoming a more Responsible Investor is never complete, and therefore commit to persistent learning and development in the pursuit of providing exceptional service to our clients.