Progress on Material Topics in 2020

Business Ethics

Enduring truths: Integrity, transparency, honesty and fairness

Our firm’s success relies on the decisions and actions made by our leaders and employees. Ethics must guide these business decisions and actions because they can have significant impact on our firm, including how it is
viewed by its stakeholders. Ethics enables our firm to meet regulatory requirements, better serve our clients’ needs, and create a secure workplace for employees. To that end, we are committed to feeding and nurturing a culture that promotes integrity, transparency and honesty throughout the organization.

In addition, our ability to create an open and responsible culture that influences ethical behavior and conduct helps to enhance the firm’s trust and reputation across all stakeholders. This further aids in the long-term success of our firm.

One way we’ve ensured a culture of ethics was to memorialize our core values through a firm-wide collaboration in 2019. Management of our core values lives with the Director, Human Resources with oversight from the Sustainability Committee. The Director, Human Resources’ role is to work with managers to incorporate the values into hiring practices, new employee onboarding, training and one-on-one conversations with their direct reports.

Breckinridge Core Values

We Put Clients First

As an independent bond manager, our primary focus is our clients. Our clients entrust us to act in their best interest. We value each client relationship and strive to achieve their objectives through customized investment solutions.

We Have an Eye on the Future

We take a long-term view rather than simply looking to the next quarter. We challenge ourselves to look further on the horizon by assessing risk, identifying new opportunities and preparing for the changing tides of our industry.

We Are Better Together

Our differences in background and experience make us a stronger team. Whether we sit on the other side of the office or on the other side of the country from our colleagues, we are motivated to connect because we produce the best outcomes for our clients by working together.

We Are Always Improving

We seek to foster a culture that encourages professional growth, inspires curiosity and rewards imaginative solutions. Many of our innovations were generated and built by employees from across the firm. We are never complacent as there is always room for improvement.

We Are Making a Difference

As a registered Massachusetts Benefit Corporation and Certified B Corp, we recognize that our responsibilities must go beyond our day-to-day jobs. We strive to be a positive influence through our use and allocation of resources. We believe these commitments help us in our goals to create long-term impact for our clients, employees and the communities in which we live, work and invest.

Governance Structure

Breckinridge is led by a Board of Directors which acts for the benefit of all stakeholders. The Board of Directors guides an Executive Committee that sets the strategic direction and trajectory of the firm and provides
direction to departmental managers. Departmental managers are responsible for implementing operational initiatives.

The Board of Directors and Executive Committee monitor and/or approve strategic sustainability initiatives. The investment process is managed by the Investment Committee. ESG risks—including climate risk—are integrated into the investment process as directed by our Co-Heads, Research and our Director, ESG Research.

The firm’s corporate sustainability efforts are led by our Director, Corporate Sustainability, who works with departmental managers as appropriate to implement sustainability initiatives within our business operations.

Both the Director, ESG Research, and the Director, Corporate Sustainability, work closely with the Sustainability Committee, which serves as the steward of Breckinridge’s sustainability and is entrusted with responsibility for broadening firm-wide awareness and participation in sustainability initiatives. The Sustainability Committee is chaired by the Director, Sustainability. The Sustainability Committee recommends
sustainability policies to the Executive Committee, departmental managers and the Board of Directors. After implementation, the Sustainability Committee monitors and reports on policies.

How Sustainability is Governed at Breckinridge

Compliance and Code of Ethics

As an asset manager, Breckinridge is retained by clients to manage parts of their financial affairs and to represent their interests in many matters. We hold ourselves to the highest ethical and fairness standards when acting on our clients’ behalf.

We believe our reputation reflects the quality of our employees and their dedication to excellence in serving our clients. Therefore, we are committed to ensuring our employees are acting in compliance with applicable laws and are avoiding situations where impropriety actually
or potentially exists.

To meet these objectives, we follow numerous policies and procedures that address ethical behavior principles. Policies are made available to all employees for reference at any time.

We believe that training and education is one of the most effective ways to foster ethical behaviors throughout the firm. Thus, training and education begins on the first day an employee joins the firm. New employees are provided with access to the firm’s compliance manual and information security policies. They are expected to complete any assigned compliance training within the first week of hire and read through the policies before completing required certifications. Activities that can interfere with decision-making or other duties also must be disclosed as part of their onboarding.

All employees are required to complete compliance training no less than annually. This mandatory session covers compliance policies and other regulatory “hot topics.” In addition, ongoing education sessions may be held for particular topics or specific departments. These can be in-person, or through emails or recorded sessions.

During 2020, we pivoted to a remote working environment. To ensure employees still received training while remote, a pre-recorded session with an overarching theme of ethical behavior was sent to staff. Employees were required to certify that they watched.

In addition, employees must acknowledge their understanding of policy compliance each year. The independent members of our Board of Directors certify that they have complied with the Board’s conflict policy.

Human Capital Management

Enduring truths: Lift up our employees by providing support, respect and opportunity

People are at the heart of our business, and we wouldn’t be successful without our employees who put in the work each day. We found this to be even more true in the wake of the COVID-19 crisis. One of our core values is “We are better together.” COVID-19 challenged our traditional understanding of this core value when we traded the environment we knew inside the four walls of our permanent office spaces for the more transitory work spaces of kitchens, living rooms, and home offices. In the months that followed, we proved that our innovative and collaborative culture survived, thanks largely to a sustained effort to provide our employees the support needed for this sudden life change.

Employment and Benefits

We are committed to providing the best possible climate for maximum development and goal achievement for all employees. That is crucial to our continued success. Our practice is to treat each employee as an individual. We seek to develop a spirit of teamwork: individuals working together to attain a common goal.

Part of providing that environment is encouraging open communication, feedback, and discussion about any matter of importance to an employee. By listening to our employees, hearing their ideas, opinions or concerns and responding sincerely, we can improve, address complaints and foster employee understanding of the rationale for practices, processes and decisions.

In addition, policies related to HCM can be found in our Employee Guidelines Handbook, given to every new employee and available to all employees. The policies and practices contained in this document are designed to comply with all applicable local, state and federal laws and regulations. Employment responsibilities reside with the Director, Human Resources.

We know that to attract and retain top talent, we must offer a competitive benefits package. We try to ensure that what we offer aligns with our mission of using our business for good when it comes to our staff and their families. That’s why we offer the following benefits, among others.

Examples of Our Employee Benefits

Some of our in-office benefits were not as relevant in 2020, such as our 100% paid gym memberships, standing desks or CPR/AED training, so we shifted some offerings to ensure the wellbeing of our employees while we were apart. Some pandemic-related initiatives we’ve rolled out are fitness challenges and group workout classes, virtual coffee breaks and “get to know leadership” sessions, additional work hours flexibility, parent and general focus groups, an internal social channel, a mental health/wellbeing series and life coaching sessions.

Training and Development

Growth and development of our workforce is a key focus for us. In 2020, Breckinridge incorporated training and development in the following ways:

  • Tuition Reimbursement Policy: Breckinridge has historically covered tuition costs for employees, and in 2020 we worked to formalize this practice. We have developed a written policy that covers the expenses related to development via Chartered Financial Analyst (CFA®) and Master of Business Administration (MBA) programs or other certification programs, with the objective of improving subject matter expertise and employee engagement. This policy was formally incorporated into our Employee Guidelines Handbook in Q1 2021.
  • ESG Education Sessions: Our Director, ESG Research, and Director, Corporate Sustainability, worked together to create and conduct/deliver a series of educational opportunities that explore ESG topics. In 2020, we held eight sessions covering topics from water risk and deforestation to the United Nations Sustainable Development Goals. Employees are also encouraged to attend industry conferences and events to further their career development. Overall, the continued development of our employees is important to us, and the use of our Performance Feedback and Development (PFD) document provides space for each employee to focus on his or her development needs and plans for the upcoming year with support and commitment from managers. In 2020, 89% of employees participated in the PFD process.
Diversity, Equity and Inclusion

Enduring truths: Creating a more inclusive and equitable workplace culture

As reported in previous CSRs, we have taken incremental steps over the years to improve our performance on DEI measures. We’ve partnered with the Gloria Cordes Larson Center for Women in Business, which works to create more inclusive and equitable workplace cultures where all employees thrive and succeed. Breckinridge participates in educational executive roundtable discussions sponsored by the Center and the annual Gearing Up conference. We sponsored and employees offered their leadership on the steering committee for the 2020 Women on Boards conference (now 50/50 Women on Boards). After initiating support of Girls Who Invest (GWI) in 2019, we hosted our first three interns from the program in 2020, with two more scheduled to join us in the summer of 2021. GWI is a non-profit organization dedicated to increasing the number of women in portfolio management and executive leadership in the asset management industry.

Learning from our programs that were gender focused and external, we pivoted to make substantive changes to our internal DEI policies, practices and programs on a broader basis. In our 2019 CSR, we reported that a more comprehensive DEI strategy was an area of focus for 2020.

Early in 2020, our Sustainability Committee established a subcommittee dedicated to HCM. This subcommittee combed through our B Impact Assessment, the GRI, and SASB standards, among other industry metrics and frameworks to surface human capital-specific metrics that we felt were material to our firm and that we’d like to see progress on. After analyzing the metrics, we ultimately landed on a Human Capital Materiality Map.

As we were developing the Map, demonstrations across the U.S. protesting the killing of Black people by law enforcement intensified throughout the spring and summer of 2020. This was a reckoning moment like no other, and Breckinridge’s President, along with many others, spoke up to their staff and the public about it. The message for us, particularly in our role as a B Corp, was simple. We should and must do better as it relates to creating a more diverse and inclusive workforce and industry, and in turn, a more equitable and just society.

We began our response to the unrest with a $12,500 donation to the Equal Justice Initiative, which for more than 30 years has worked to end mass incarceration and excessive punishment in the U.S., to challenge racial and economic injustice, and to protect basic human rights for the most vulnerable people in American society. We then met the immediate request of our staff to start educational sessions on DEI topics specific to race. We partnered with two external consultants, YW Boston, a non-profit organization working to eliminate racism and empower women, and Language and Culture Worldwide LLC, a consultant focused on educational programs on bias, cultural competence, leadership, diversity and inclusion. These sessions covered topics such as “Systems as Violence,” “Courageous Conversations About Race,” “Allyship” and “Microaggressions.” While this was happening, the Director, Human Resources, and Director, Corporate Sustainability, waded into further research, referencing the Human Capital Materiality Map, and having conversations with internal and external parties to advance development of a full-scale DEI strategy.

After spending the remainder of 2020 developing the strategy and going through extensive reviews, we’re proud to say that we officially rolled out the Breckinridge Diversity, Equity and Inclusion Strategy to staff in the first quarter of 2021, with some of the initiatives already underway. The strategy focuses on the following areas: Talent Acquisition, Internships, Compensation, HR Policies, Training and Development, DEI Education, Inclusion, Vendor Management and Reporting.

Highlights from Our New DEI Policy

  • We will be providing DEI education specific to new employees, leadership roles, and all staff.
  • We will be conducting further research in the area of inclusion, which will consist of employee engagement and feedback.
  • We will develop a policy to actively consider a more diverse pool of vendors.
  • We will review job descriptions, revise our interview structure, and work to increase our representation of women and people of color by 3% each over the next three years.

Diversity Breakdown of Breckinridge Employees

Below is a breakdown of Breckinridge employees by gender, age and ethnicity. Ethnicity was collected by a voluntary self-identifying survey administered by our Director, Human Resources.

Client Experience

Enduring truths: Elevate the client experience, and provide continuity in times of crisis

Recognizing that our clients are at the center of all that we do, client experience is a material priority and strategic focus. Breckinridge promotes a responsive culture that continuously seeks to elevate the client experience across the firm.

Sustaining and advancing the client experience was challenged during 2020 as the COVID-19 pandemic forced employees to a remote working environment effectively overnight. Remote work helped to ensure employee health and safety, enabled employees to address family-care needs and complied with government initiatives seeking to control spread of the virus. During the ensuing 12 months, our highest priority was ensuring our clients had everything they needed to feel reassured.

The information technology team immediately addressed any outstanding needs to equip and enable every employee to work remotely. These efforts included, among others, deployment of equipment upgrades to all employees, network integrity and reliability adaptations and enhancements and the strengthening of communications infrastructure—including web-based conferencing capabilities to support ongoing internal and external communications.

Complicating the effort to adapt to remote work requirements was an ensuing spike in financial market volatility, which served to intensifying client service requirements in every phase of operations. The Investment Committee, and the portfolio management, research and trading teams initiated a schedule of daily, cross-functional meetings to monitor market conditions, consider strategic investment process responses and implement changes at the portfolio level to protect client assets. Trade reconciliation teams responded to increased levels of client and portfolio trading activity.

Breckinridge increased client communications as market volatility increased to keep clients informed. Our marketing and consultant relations teams developed a rapid response communication program. Consultant relations conducted one-to-one outreach. In addition, weekly Investment Committee communications were emailed and posted to our website. Live quarterly client webinars discussed macro and micro views on the bond market. The webinars continue even as market volatility has receded and the nation’s government and health care systems continue efforts to control spread of the virus.

These efforts resulted in being named a 2020 Honoree for The Gramercy Institute Financial Marketing Leadership Awards. Breckinridge’s entry was chosen for outstanding leadership in the development and execution of marketing campaigns in the midst of this year’s market volatility. Our entry was evaluated on effectiveness of initiatives, inspiration by example, performance under pressure, preparedness and establishment of a clear vision.

Reporting and communications have always been key features of our client experience. Our overriding objective is to provide timely, succinct, and cogent information on our strategies, market outlook and portfolio positioning. An area of focus during 2020 was enhanced reporting on the influence of ESG factors in our investment process.

We developed new ESG reporting for our multi-sector strategies. The enhanced reporting is for contextual purposes and illustrates for clients how investments in their portfolios compare with relevant indexes on key ESG factors as measured by Breckinridge and independent research organizations. Environmental criteria include climate risk, climate policy, greenhouse gas (GHG) emissions and energy consumption, for example. Among the social measures covered in the reports are affordable housing and income inequality. Governance measures include key data related to supply chain management, DEI and executive compensation, among others. Through a collaborative effort, our teams designed and developed a distribution plan to execute in 2021.

Although our consultant relations team acts as the front line of communication, teams across the firm contribute to a client’s experience. As reported in 2019, our plan to build a Client Experience Materiality Map moved forward. With the creation of the Map, liaisons from the consultant relations team were assigned to each functional group across the firm to work together towards the goal of improving the client experience across every facet of the organization.

Climate Week Campaign

As an example of our commitment to reporting and communication, we conducted a comprehensive climate week campaign to educate and advocate for climate action. The campaign was recognized with the Gramercy Institute Asset Management Marketing Award –Best Social Media Marketing Campaign for Business to Intermediary within the Single Market.

Risk Management

Enduring truths: Proactively identifying, assessing and addressing risk in many forms

Breckinridge recognizes that risks and conflicts are inherent within an organization and can surface unexpectedly. We take a proactive approach to identify and assess areas that can introduce risks and conflicts into the firm. 

Developing controls to mitigate and/or eliminate those risks is a collaborative effort that spans across multiple departments. We are committed to continual review and investment in systems technology to enhance our business processes and risk management controls.

Operational risk management originates from our Risk Committee, a cross-functional group of senior employees who are tasked with identifying and assessing risks and conflicts across the firm. The process allows us to identify the risks present in our firm, assess whether existing controls are adequate and make modifications to those controls, as needed.

Periodic testing and verification of policies and controls help to ensure they are adequate. The Risk Committee is chaired by our CCO and meets quarterly. Other members of the committee include our Chief Operating Officer, Chief Technology Officer (CTO) and senior members from portfolio management, trading and consultant relations.

Disaster Recovery

Our Business Continuity and Disaster Recovery Plan (BCP) seeks to provide uninterrupted service to our clients and to minimize downtime in the event of a system or vendor failure. Our Business Continuity Committee (BCC) oversees the administration and implementation of the plan, which underwent an external review in 2020 that validated our procedures as adequate.

The BCP plan was put to the test during the pandemic when we made the sudden shift of working from home on March 12, 2020, for an undetermined length of time, and the preparedness of our technology teams and BCC enabled our employees to provide uninterrupted service to clients.

Our BCC oversees the administration and implementation of the BCP. Breckinridge has two secure off-site data centers that offer data and application redundancy. Not all records are backed in real time, some are nightly.

In addition to the offsite data centers, we maintain two geographically diverse office locations. Either is fully suitable to continue service to clients should one office experience a significant business interruption. Additionally, all employees can work remotely until office space is available.

Financial Implications of Climate Change

Breckinridge views climate change, and its financial implications, to be material issues for our business in short- and long-term planning. The risks are related to both our operations and the investments we make on behalf of our clients. In 2020, our Sustainability Committee created a Climate Policy, outlining our views and overarching intentions to address climate change. This will formally be introduced in 2021, followed by the recommendation of a Climate Action Plan, which will outline an approach for identifying and measuring climate impacts on the firm and its investments, as well as a proposal for managing those risks.

Our operations are exposed to physical climate risk, such as those posed from our Boston office location near the waterfront. Breckinridge instituted initiatives to manage climate risks in our operations, including the BCP mentioned above. Climate change is also impacting our investments. As examples, some municipal and corporate bond issuers are being affected by physical risks, such as a coastal community dealing with sea level rise, or transition risk, such as a coal company suffering from a loss of revenue due to a market shift to renewable sources of energy. While currently infrequent, poor management of climate risks may lead to an uptick in issuer downgrades by credit rating agencies, financial distress and a devaluation of our investments.

Costs associated with evaluating and managing climate risk and opportunities include our data warehouses and information security contracts for our operations and the cost of climate data and other subscriptions for our ESG research efforts.

Climate change presents risks and opportunities for corporate issuers. We incorporate climate risk into our corporate ESG frameworks and comparables sheets, where we determine it to be most material. Given Breckinridge’s investable universe, transition risk, or the risks stemming from the shift to a low carbon economy, is the primary challenge facing corporate issuers. For certain sectors, such as Energy and Utilities, analysts examine measures such as GHG emissions intensity, emission reduction goals, power generation mix, long-term energy resource planning and performance relative to peers. Other sectors, such as Real Estate Investment Trusts, are presented with physical climate risk. In this case, analysts seek to understand how a company is managing its property portfolio to adapt to a climate marked by extreme weather and sea-level rise. When disclosed by a company, analysts review Task Force on Climate-related Financial Disclosure (TCFD) reporting to assess management’s climate risk planning. Finally, climate risks, if particularly material to the sector or issuer, are examined during engagement calls. 

Climate change poses both risks and opportunities for municipal issuers as well, depending on geography, the built environment and the local economy. We incorporate climate change analysis into our municipal ESG frameworks where we determine it to be most material. Exposure to hurricanes, flooding and wildfires is assessed using metrics produced by risQ, a third-party data vendor. The data from risQ helps us gauge the magnitude of an issuer’s physical climate risk relative to implementation of proactive solutions like forward-looking land use planning or more stringent building codes. Our municipal analysts also consider climate transition risks and opportunities, such as job-market exposure to carbon-intensive industries or emerging clean technologies. Our understanding of the effects of climate change on municipal issuers is further enhanced through our issuer engagement efforts. In 2020, we spoke with local governments about equity considerations in climate change planning and municipal electric utilities about carbon-neutral generation resource planning.

Finally, for mortgage-backed securities (MBS), Breckinridge invests primarily in agency MBS. Unlike other municipal and corporate bonds, agency MBS have low credit risk thanks to explicit or implicit guarantees from government sponsored entities (GSEs) such as the Government National Mortgage Association (Ginnie Mae), Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac). Prepayment risk is a key risk for agency MBS because it can affect the timing of cash flows, which drives realized returns from the underlying pool of mortgages. A natural disaster can accelerate the principal prepayment of mortgages in the affected area, as victims qualify for mortgage relief. Therefore, climate events can impact broad prepayment trends, altering the cash flows and therefore impacting investor returns.

To better understand climate-related prepayment risk in MBS, the Breckinridge team analyzed the buyout policies of GSEs as they relate to environmental disasters, such as the hurricanes that hit the states of Florida and Texas in 2017. The team also researched the experiential effect that these events historically had on mortgage prepayment speeds.

Based on our research findings, we also created a physical climate risk score that is used to adjust the annualized percentage of a mortgage pool expected to be prepaid above and beyond scheduled amortization in a year, also known as the Conditional Prepayment Rates (CPR). Our adjustment is based on the exposure to climate-related risk factors based on the geographic composition of the underlying loans. We leveraged our municipal ESG analysis to develop the score.

Customer Privacy

Breckinridge respects the privacy of our client relationships and is committed to maintaining the highest standards of confidentiality and data security for all our existing and prospective clients and employees. Because multiple regulatory agencies impose obligations on the firm, the regulations and laws that inform our privacy and information security policies are extensive and complex.

With respect to nonpublic personal information, Breckinridge strives to ensure its security and confidentiality, protect against anticipated threats and hazards to its security and integrity, and protect against its unauthorized access or improper use.

An Information Security Committee (ISC), chaired by our CTO, has been appointed to oversee the privacy and information security programs. The ISC meets regularly and is responsible for periodic review and administration of the policies, reviewing and responding to incidents, and training and educating employees. In 2020, we deployed a new technology which enhances our data loss prevention capability.

Marketing and Labeling

All Breckinridge communications, including marketing materials, are subject to the antifraud provisions of the Investment Advisers Act of 1940. In addition, Breckinridge expects its employees to act with the highest integrity and professionalism when interacting with the public, whether through social media or in-person meetings. Breckinridge policies help employees navigate the requirements under federal securities laws and protect Breckinridge’s name, reputation and credibility.

Marketing materials generally undergo a multi-departmental review prior to use. The internal reviews end with a final review by our compliance team to ensure appropriate disclosures are in place and that the content is fair, balanced and true. Our policy forbids the use of marketing materials and social media content that has not been approved by our compliance team.

All compliance policies are placed in an easily accessible location for employees to reference at any time. Firm-wide training on policies takes place annually and employees are required to acknowledge their compliance and understanding at hire and annually thereafter.

The adequacy and effectiveness of these policies are reviewed annually. Internal audits are conducted by the compliance team to ensure that the policies are being followed. In addition, we engage third-party consultants to independently verify the policies and controls we have implemented.

ESG Integration in Financial Analysis

Enduring truths: Identifying non-financial risks, pursuing positive outcomes

Driven by our investment research team, Breckinridge integrates material ESG issues to identify and assess long-term and idiosyncratic risks, which we feel the market may misprice. Our belief is that thoughtful and forward-looking assessment of risk would be incomplete without the inclusion of material ESG factors. We also believe ESG factors can provide useful insights into the character and caliber of management.

Sustainable strategies AUM and number of accounts are as of 12/31/20. Breckinridge’s sustainable strategies selectively invest in bond issuers with above-average ESG profiles and bonds that fund essential environmental, social or economic development projects.

Corporate ESG Updates

Breckinridge’s corporate research team spent extensive time during the year working to advance our corporate ESG scoring models. The updated methodology provides a significant improvement, featuring additional sector granularity, risk adjustments, and improved incorporation of company reported ESG data. The new frameworks rely more heavily on Breckinridge analysts’ knowledge and experience in ESG analysis, including sector risk ratings and sector-specific materiality of ESG factors. The enhanced frameworks will be completed in the first half of 2021.

Municipal ESG Updates

During 2020, we updated our municipal ESG framework for local governments (cities and counties) and created a new ESG methodology for housing finance agencies (HFAs). We now employ ten separate frameworks to assess quantitative and qualitative ESG risks for issuers in the largest municipal sectors, including water utilities and hospital systems. The factors assessed in our frameworks reflect our analysts’ views of ESG drivers that may influence the credit quality of the issuer being evaluated for investment. While some of these factors are rarely traceable to rating agency downgrades and slowly ripen into material credit risk, we believe they help us highlight outliers and can be relevant, in extremis.

Our updated ESG methodology for cities and counties features new environmental, social and governance indicators. We now analyze physical climate risks, such as wildfire and flooding, with information provided by risQ. In addition, we added new measures to help us evaluate diversity and integration in support of our belief that inclusive communities may be more resilient over time. Governance factors now include an assessment of an issuer’s community engagement efforts, or how well municipal officials communicate with stakeholders and systematically consider racial, gender and economic disparities in policies and planning.

With the establishment of a dedicated housing ESG framework, we strengthened our analysis of HFAs. Bonds issued by HFAs finance new construction and rehabilitation of affordable housing. Our new framework rewards HFAs that emphasize programs designed to support individuals throughout the cycle of homeownership and address other social obstacles related to housing. It also enables our analysts to assess the prevalence and effectiveness of an issuer’s environmental programs and consider governance characteristics such as operational independence and disclosure.

We expect to update our framework for evaluating ESG risks for school districts in 2021.

Issuer Engagement


Engagement offers Breckinridge the opportunity to gain a deeper understanding of ESG matters pertaining to an industry, sector or an issuer. Our approach to engagement is to have direct conversations with issuer management teams as well as industry experts in academia and at non-profit organizations. In this way, we look to:

  1. 1. Gain a better understanding of an issuer, industry or sector’s ESG profiles, material issues, opportunities and risks.
  2. Provide an idea generation platform for our analysts.
  3. Encourage the transparent reporting of material ESG issues, as we believe improved disclosure enhances our ESG analysis to the benefit of our clients.

2020 Engagement Review

Bond issuer engagement at Breckinridge expanded during 2020. The information discovered during more than 100 meetings with bond issuers, as well as subject matter experts (SMEs) like Ceres, explored best practices in sustainability as corporations and municipalities are increasingly integrating ESG considerations into their operations.

We held engagement discussions focused on themes, investigating sector-specific issues that impact an issuer or sector, as well as calls that covered a variety of ESG issues pertinent to a corporate sector.

For corporates, we pursued five different ESG themes including product quality and safety for the healthcare/pharmaceutical sector and bank efforts to incorporate climate risks and DEI into operations and lending decisions. Related to the healthcare/pharmaceutical sector, product quality and safety represent significant operational, financial and reputational risks for pharmaceutical companies. Discussions revealed best practices among selected engagement participants as well as areas for improvement and steps being taken to address them. Through a series of engagements with six large U.S. banks, we noted a significant increase in activity intended to manage and mitigate climate risk through increased disclosures, assignment of board- and executive-level ESG management responsibilities for risk assessments, regulatory oversight and capital raising and lending. As it relates to our discussions on DEI, we observed improving transparency on gender pay equity and some progress in diversity in management positions, although most banks we spoke with acknowledged that more needs to be done in both areas.

We engaged across four ESG themes in municipals, including the decarbonization of the U.S. public power sector and equitable climate change planning for local governments. Engagements with five electric utility issuers revealed challenges, opportunities and varying levels of progress to date on achievements of carbon-free resource goals. Our analysts spoke with seven municipal issuers and SMEs about climate equity, including a climate expert with the Union for Concerned Scientists (UCS). Through these conversations, our analysts learned that both climate change and the COVID-19 pandemic are disproportionately impacting vulnerable communities and can exacerbate problems across racial, gender, and economic disparities.

Climate Action 100+

Climate Action (CA) 100+ is an investor initiative to ensure the world’s largest corporate GHG emitters take action to address climate change, curb emissions and strengthen climate-related financial disclosures. Breckinridge is a co-lead engagement investor with three U.S.-based companies on the CA 100+ list. We organized and helped lead meetings with the investor engagement teams and with these three companies during the year, encouraging the management teams to take action on the CA 100+ policy goals. We look forward to continuing these collaborative engagements in 2021.

Corporate Citizenship

Enduring truths: Delivering support when, where and how it is needed most

Citizenship has long been a part of our corporate culture: helping our communities, aligning our giving with causes we care about, and building a sense of team among our employees. In 2020, our communities needed help more than ever before, yet it was more difficult for us to deploy our resources based on models we have emphasized in the past. When the pandemic hit, we tilted our strategies from a focus on in-person volunteerism to one of thoughtful philanthropy in response to community needs, driven by employee initiatives.

As a firm, we are committed to donating one percent of our gross receipts annually, which we slightly exceeded this year. We match individual employee giving up to $1,500 and had 65% of employees participate in this program in 2020. We also offer employees two company-sponsored volunteer days and one personal volunteer day. As of December 31, 2020, we have cumulatively contributed over $3.8 million (since 2003) and over 4,423 volunteer hours (since 2012).

Ambassador Program

Our Ambassador Program is the anchor of our charitable giving, which provides a cohesive giving and volunteer strategy and meaningful long-term relationships with our nonprofit partners. The program is made up of five causes or organizations, each supported by an employee-led team. The team is responsible for deploying charitable dollars, developing volunteer opportunities, and educating our staff about the work and mission of their organization.

We believe the Ambassador Program allows us to have a greater impact over time. As noted, this past year proved challenging to have “boots on the ground” in a safe way, so our Ambassadors had to be creative. We were proud to see that the employees shifted their giving strategies to the areas that the organizations identified as needing our support most. Outdoor-focused groups hosted a few socially-distanced volunteer events, and others shifted to ongoing virtual opportunities. Additionally, almost all groups hosted their organizations for virtual “lunch and learn” sessions for our staff.

Quarter of Service

As the end of the year loomed, we realized COVID-19 induced restrictions on our ability to volunteer had caused a large gap compared with our pre-pandemic volunteer experience. In response, for the last three months of the year, we provided employees with a list of virtual volunteer opportunities and incentivized them to volunteer by hosting a lottery for charity. During each of the last three months, we randomly drew one person from the pool of participants. Donations were made in their name to a charity of their choice. During the incentive program, 63% of 2020’s 452 total volunteer hours were accrued.

Sustainability-Aligned Sponsorship

Additional giving was focused on sustainability-aligned sponsorships. In 2020, we supported organizations like SASB, Ceres, The Crane Institute of Sustainability and Women on Boards 2020 (now 50/50 Women on Boards) among others. We also sponsored The Trustees of Reservations’ State of the Coast Report.


As the pandemic began, we saw an immediate need to address some of the most pressing issues facing our community through financial support. We began with a donation to the Center for Disaster Philanthropy’s COVID-19 Fund, which would send funds to the nonprofits working directly in response to the pandemic.
We also focused on food insecurity and donated to the San Diego Food Bank and Project Bread in Boston. After the initial round of donations, eight teams of 10 employees, each with a budget of $10,000, determined additional COVID-related donations. The following organizations were chosen by our employees:

  • Boston Medical Center
  • Boston Resiliency Fund
  • Lazarus House Ministries
  • Off Their Plate (World Central Kitchen)
  • Partners in Health
  • The Boston Foundation
  • The San Diego Foundation
  • Women’s Lunch Place

*Began tracking volunteer hours in 2012. Began tracking philanthropy in 2003. The outlined bar for 2010 corporate philanthropy denotes $100K special donation made for Haiti earthquake relief.

Operations and Supply Chain

Enduring truths: Accepting the truth and the challenge of climate risk

As an investment manager who analyzes the risks of climate change in our bond portfolios, we recognize the immediate and long-term implications of climate change and are conscious of our impact. In 2017, we signed the We Are Still In declaration, demonstrating our commitment to delivering on the Paris Agreement amidst the U.S. withdrawal. In 2021, we intend to join America Is All In, the new coalition that builds on the We Are Still In declaration, mobilizing groups from across society to work together in tackling climate change. Additionally, in September of 2018, we signed on as a signatory to the TCFD to support recommendations and frameworks to help companies develop more effective climate-related financial disclosures through existing reporting processes. This will be our second year reporting to the TCFD framework (See TCFD Index). Taken together, these efforts will help inform our future Climate Action Plan.

Reducing Our Environmental Footprint

Like our focus on HCM this year, our Sustainability Committee also created a climate subcommittee. The subcommittee created a Climate Policy, based on the Intergovernmental Panel on Climate Change (IPCC). The Policy, which will be formally introduced in 2021, gives a broad overview of how we view and approach climate change as an organization.

At the same time, our Director, Corporate Sustainability, began crafting a Climate Action Plan to consider our impact on the environment within our business operations, but realized throughout the process that we have much to learn. We are continuing down the path of determining the best fit for a framework or standard that we can use to set goals for carbon reduction in both our operations and investments. These discussions will continue throughout 2021.

In the meantime, 2021 will be focused on more accurate measurement of GHG emissions, and we will be looking for a better way to track our Scope 3 emissions (currently we track commuting and travel through an employee survey). In 2020, we included our datacenter energy usage for the first time in our Scope 2 calculations. We also determined that our footprint from day-to-day operations would be incomplete without adding employees’ individual footprints from their home offices during the pandemic. To that end, we included an average estimated footprint for all our employees in our offset purchases in 2020.

2020 Emissions

With our focus on better understanding our impact, we decided to change providers of our carbon credits to a vendor who offered more transparency into the offset market. The firm, Pachama, uses LiDAR imaging, satellite data and artificial intelligence to remotely verify projects and estimate carbon and biomass. Pachama uses fees we pay based on our GHG emissions to fund activities that protect and restore forests. To offset our 2020 emissions (Scope 2 and the Scope 3 portions that we currently measure), we have invested in two projects: Hudson Farm and Brazil Nut Concessions. Hudson Farm is an American Carbon Registry project made up of several parcels of land in New Jersey, focused on improved forest management. This project actively harvests timber using sustainable forest management practices, which helps ensure more carbon is sequestered, and is home to several initiatives connecting the community to the forest. Hudson Farm has also allowed us to invest closer to our headquarters in Boston. The Brazil Nut Concessions is a Verified Carbon Standard project preventing deforestation and protecting biodiversity on 500,000 acres in the Peruvian Amazon. This project makes a meaningful impact on the environmental front by avoiding deforestation of old growth trees and protecting several endangered species, but also on the social side by supporting the region’s economic development and the stability of farmers, landowners, and the broader community.

We know that offsets are not the only solution, but we know they’re better than doing nothing while we work towards more accurate measurement and reduction of our emissions, and we’ll always plan to offset what we cannot eliminate in the future.

In 2020, we continued to minimize our environmental footprint through the following efforts: