We believe the long-term financial success of our various stakeholders is dependent upon a healthy global environment, a stable society, and well-functioning, well-governed companies.
We view the integration of ESG factors as a long-term aspect of Northern Trust’s fiduciary heritage.
Our asset servicing business is committed to supporting the efforts of our institutional clients to meet sustainable investment goals by giving them access to ESG insights, comprehensive reporting tools and risk exposure analytics capabilities such as carbon footprint analysis. With the knowledge gained through these tools, our clients can engage with asset managers and stakeholders around the evolving environmental impacts of their investment portfolios, manage potential stakeholder concerns and gain greater awareness of financial and reputational risks.
We also encourage our clients to achieve greater transparency and satisfy ever-increasing regulatory requirements by integrating the resulting analytics into their disclosures and other publications.
To support our clients’ growing ESG oversight and governance programs, we offer a suite of solutions.
Launched in 2020, this service offers a quantitative approach to measuring ESG factors. It provides clients a summary ESG profile of their investments with more detailed reporting that includes carbon footprint analysis.
Through this service, clients can track the compliance of individual investment managers or programs to their ESG-focused mandates. The service identifies breaches to a client’s mandated instructions by flagging investments in companies that derive revenue from restricted areas. We recently enhanced this service to provide greater flexibility for clients with more detailed monitoring requirements, such as custom revenue thresholds.
This service enables clients to evaluate the relative performance impact of ESG factors on their portfolios, programs and policy statements. It supports a broad range of ESG-focused benchmarks that allow for relative comparisons of securities down to the most granular level. Throughout 2021, we expect to continue to focus on expanding our portfolio measurement and monitoring capabilities in relation to climate risk. We are further integrating ESG data into our analytics and reporting platforms to help clients gauge the impact of their ESG strategies on overall investment performance and effectively monitor enhanced investment restrictions. We are also developing additional support to address a growing range of regulatory and industry reporting frameworks that are impacting clients around the world.
Our asset management business firmly believes the appropriate management of ESG factors can create long-term shareholder value. When managed well, material ESG factors can position a company for success. When managed poorly, they can lead to negative externalities that can result in reputational and financial risk.
Through our long-term commitment to social, environmental and financial integrity, we have developed in-house, specialized expertise. Our dedicated resources are focused on the integration of sustainable investing factors across our investment processes.
By incorporating a range of available tools and approaches to holistic portfolio construction and stewardship, our capabilities encompass a wide spectrum of sustainable approaches, from exclusionary to integration to thematic. For more than 30 years, we have been managing portfolios in this style, and have seen this space evolve significantly. We are committed to evolving and advancing the innovative capabilities available to the marketplace.
Our capabilities encompass a wide spectrum of sustainable approaches, from exclusionary to integration to thematic.
Northern Trust offers investment capabilities with sustainable objectives in equity, fixed income, alternatives and listed real assets. The approach and objective of a sustainable investing strategy is multi-dimensional and may apply differently to different asset classes and in different geographies.
While sustainability factors are broad in nature, our investment framework focuses on certain key issues and approaches. It is our view, for example, that the way a company manages diversity can either create value or stifle it. Appropriate management of climate risk distinguishes industry leaders from industry laggards and affects stakeholders broadly. In this effort, we are guided by international norms and standards including the OECD guidelines, the UN Global Compact, and the ILO Core Conventions.
In 2020, our asset management research team developed a new proprietary ESG scoring methodology that enables the integration of sustainability into investment portfolios in a more transparent and focused manner. It is built on a robust evaluation of financially material sustainability issues relevant to each industry, focusing on the specific risks likely to impact a company’s financial performance, integrating the materiality standards from the Sustainability Accounting Standards Board with aspects of the forward-looking recommendations proposed by Taskforce for Climate-Related Financial Disclosures.
In 2020, our asset management research team developed a new proprietary ESG scoring methodology that enables the integration of sustainability into investment portfolios in a more transparent and focused manner.
Responsible stewardship is a critical step in ensuring that the capital entrusted to us is working on behalf of our clients to create value and mitigate risks as we work towards financial, environmental and social sustainability.
Serving as an investment steward for client assets is a privilege, and we appreciate the significant responsibility that comes with it. As a global investor, we have the power to identify opportunities for positive change. One way we do so is to encourage companies to commit to business practices that improve the environment, society and corporate governance, as we believe sustainable practices are key for long-term business success.
To influence companies to adopt more sustainable practices, we prioritize our engagements with purpose.
To influence companies to adopt more sustainable practices, we prioritize our engagements with purpose. That is, we identify the areas that represent the most significant threats to sustainability and where we can make the most difference.
In this time of public health crisis, we are seeing compelling signals that strategies that integrate material ESG analytics are in many cases demonstrating effective downside risk management. The findings from this market environment are providing us with additional evidence and insights into the material nature of ESG issues and will form a basis for future engagements.
We encourage our clients to integrate ESG analytics into their disclosures and other publications
The investment teams of our Wealth Management business continue to experience a significant increase in interest from clients in sustainable/ESG investments. Northern Trust’s deep and extensive history in this space has been a differentiating factor that has led several new clients to choose Northern Trust.
We recently began working with a leading ESG data provider to allow for analysis of ESG products or entire client portfolios. This data will enhance the experience for our clients by allowing them to better understand their exposure to key ESG metrics and make changes to align with their values.
We also developed a process through which clients’ interest in ESG investing is documented, ensuring they are able to implement sustainable investment strategies in their trust accounts and IRAs. We also launched ESG model portfolios that allow for client portfolios to be invested in ESG strategies while aligning with Northern Trust’s strategic and tactical asset allocation recommendations. Northern Trust continuously evaluates our Wealth Management product offerings to ensure our solutions fulfill clients ESG needs and meet Northern Trust’s high expectations for investment performance.
