SUSTAINABLE PRODUCTS AND SERVICES
Throughout 2022, Northern Trust Asset Management (NTAM) continued to expand its sustainable investment solutions with the launch of a variety of innovative pooled vehicles for global investors. In the EMEA markets, for example, the team launched two global bond ESG funds, the Global Bond ESG Climate Index Fund and the NT Global 1-5 Years Bond ESG Climate Index Fund. These vehicles target issuers that portfolio managers believe are better positioned to manage financially material ESG risks and transition to a low-carbon economy. The existing Sustainable Global Developed Real Estate vehicle underwent a methodology enhancement that sought to integrate insights from the NTAM ESG Vector ScoreTM, a proprietary assessment tool which assesses financially material ESG analytics. In the U.S. market, through our FlexShares ETFs, we launched an emerging markets fund that also utilizes the Northern Trust ESG Vector ScoreTM. The fund is a complement to a suite of capabilities that spans the equity and corporate-fixed-income asset classes, and which includes a robust climate overlay that targets a meaningful reduction in aggregate carbon emissions relative to respective benchmarks, while also targeting an overall improvement in carbon risk rating.
As part of our effort to support our clients to meet their sustainable investment goals, each of our businesses work to achieve greater transparency and satisfy ever-increasing regulatory requirements. For our institutional clients, this is also done by integrating the analytics resulting from our work and tools4 into their disclosures and other publications. To support clients’ growing ESG and climate risk oversight and governance programs, our Asset Servicing business offers a suite of solutions including:
4 We share analytics resulting from a wide range of data, platforms and reporting tools that deliver a wide range of ESG indicators for investors to monitor the evolving impact of their investment portfolios.
Portfolio Manager Support: This service is focused on the front office and the portfolio management process. This service integrates ESG across the lifecycle of research management, idea generation, portfolio construction and risk management to optimize the entire investment process. This technology-based solution adapts to the portfolio manager’s process, enabling digitization of that process and systematically embedding ESG data and decisioning. The seamless integration of multiple market and internal data sources allows managers to identify and scale their best ideas with an ESG lens. The results are a measurable and repeatable ESG investment process with comprehensive investor and regulatory reporting capabilities.
Compliance Monitoring: Through this service, clients have the ability to track the compliance of individual investment managers or programs against their ESG-focused mandates. The service identifies breaches of a client’s mandated instructions by flagging investments in companies that derive revenue from restricted areas or those that fall below specified ESG ratings thresholds.
Northern Trust Wealth Management seeks to be at the forefront of empowering clients to incorporate their environmental, social and governance (ESG) investment objectives without jeopardizing financial goals, guiding clients in measuring ESG risk exposures and helping families and institutions establish ESG-related investment guidelines, consistent with our fiduciary heritage.
Sustainable investment objectives, whether to benefit the planet, people or processes, are increasingly becoming part of many investors’ priorities. Northern Trust offers a wide array of solutions and resources to meet investors’ growing demand to better align investment strategies and values. We help investors meet sustainable objectives within a goals-based framework through select ESG investment products and superior evaluation and reporting capabilities. The idea is simple yet powerful: We strive to ensure ESG-labeled products deliver on what they promise—meeting each client’s needs and Northern Trust’s high expectations for investment performance.
We continue to see benefits from our relationship with a leading ESG data provider to allow for analysis of ESG products or client portfolios. This capability is enhancing the experience for clients by allowing them to better understand their exposure to key ESG risks and opportunities.
Northern Trust offers a suite of post-trade analytics services providing investors with insight and oversight of key ESG and climate-risk exposure detail.
ESG Ratings Summary: This reporting service, which launched in 2020, offers a quantitative method for measuring ESG factors. Using a bottom-up, holdings-level approach, it provides clients with a top-down summary view of ESG risk exposures over time, with drill-down analytics available within each pillar.
Climate Focus: We introduced a focused reporting option to help clients monitor and disclose climate risk exposures aligned to the Task Force on Climate-Related Financial Disclosures (TCFD) framework. This service includes portfolio-level detail on a range of physical risk and transition risk indicators, such as carbon emissions data and scenario pathway analysis.
Performance Measurement: Clients are able to evaluate the relative performance impact of ESG factors on their portfolios, programs and policy statements. We support a range of ESG-focused benchmarks that allow for relative comparisons of securities down to the most granular level. We have also integrated ESG scores into our reporting platforms to help clients gauge the impact of ESG performance versus financial performance.
Multiple product initiatives are in-flight to integrate additional ESG and climate data into our analytics and reporting platforms, and to expand data coverage for a multi-asset class investor beyond public assets.
