Firm celebrates 10-year anniversary with heightened focus on sustainability
Northern Trust Asset Management’s FlexShares® Exchange Traded Funds announced today the launch of a new suite of core Environmental, Social and Governance (ESG)* ETFs focused on climate, including:
- FlexShares ESG & Climate US Large Cap Core Index Fund (NYSE: FEUS)
- FlexShares ESG & Climate Developed Markets ex-US Core Index Fund (NYSE: FEDM)
- FlexShares ESG & Climate Investment Grade Corporate Core Index Fund (NYSE: FEIG)
- FlexShares ESG & Climate High Yield Corporate Core Index Fund (NYSE: FEHY)
The four new climate ETFs add to FlexShares’ existing ESG ETF offerings, FlexShares STOXX US ESG Select Index Fund (ESG) and FlexShares STOXX Global ESG Select Index Fund (ESGG). The new fund suite seeks to help investors improve their portfolio’s overall ESG score and reduce carbon risk, while maintaining core equity and fixed-income exposure. The funds utilize the Northern Trust ESG Vector Score** as well as a carbon risk rating in an effort to hedge ESG-related risks and capitalize on sustainable opportunities.
“The combination of our ESG Vector Score and carbon risk rating creates a complementary strategy to identify sustainability leaders and laggards in each sector in a consistent way,” said Christopher Huemmer, Senior Investment Strategist for FlexShares ETFs. “In response to heightened client demand for climate investing, we created this new suite to offer core investing strategies that we believe are better positioned to benefit from the ongoing transition to a low-carbon economy.”
The ESG Vector Score methodology developed by Northern Trust Asset Management (NTAM) seeks to identify ESG-related business issues most likely to impact a company’s financial performance and a portfolio’s investment return. The scoring methodology relies on a framework established by the Sustainable Accounting Standards Board (SASB) that seeks to determine sustainability industry leaders and mitigate sustainability risks before they impact the company’s financial statements and the portfolio’s performance.
With climate change a top concern among many investors and regulators globally, each strategy in the core ESG ETF suite also includes a special focus on carbon risk. In partnership with Institutional Shareholder Services (ISS), each company is examined using a carbon risk rating methodology to determine its current carbon emissions, its efforts to reduce its carbon footprint, and its potential exposure to carbon risk relative to other companies in its industry. Using these ratings, each strategy in the suite targets a reduction in aggregate carbon emissions and carbon reserves relative to its parent index, while also targeting an overall improvement in its carbon risk rating.
The launch of FlexShares’ new ESG suite coincides with the 10-year anniversary of the introduction of its first ETFs in 2011. Over the past decade, FlexShares has become a $19 billion global brand committed to meeting complex investor challenges by providing investment solutions that go beyond conventional “off the shelf” products. Following the brand’s expansion into the European market in January of this year, FlexShares’ product lineup now consists of 33 unique ETFs across the U.S. and Europe. At the core of its purposeful investment solutions are four real-world investment objectives: capital appreciation, risk management, income generation and liquidity management.
Darek Wojnar, Head of Funds and Managed Accounts for NTAM, added: “For the past decade, we’ve defined our place in the ETF industry through our primary focus on meeting specific investor objectives with quantitative solutions. Looking ahead to the next 10 years, we recognize the growing importance of sustainability to those objectives and the need for ESG funds that can serve as a core holding across asset classes. We believe this is a key area for growth as we position the business for continued success.”
FlexShares Exchange Traded Funds are designed to pursue specific investment goals across both passive and active strategies. FlexShares offers differentiated ETF strategies that can improve and simplify the investment decision process for the long-term investor. Please visit our website or connect with us on our LinkedIn page.
About Northern Trust Asset Management
Northern Trust Asset Management is a global investment manager that helps investors navigate changing market environments, so they can confidently realize their long-term objectives. Entrusted with US$1.2 trillion of investor assets as of June 30, 2021, we understand that investing ultimately serves a greater purpose and believe investors should be compensated for the risks they take — in all market environments and any investment strategy. That’s why we combine robust capital markets research, expert portfolio construction and comprehensive risk management to craft innovative and efficient solutions that deliver targeted investment outcomes. As engaged contributors to our communities, we consider it a great privilege to serve our investors and our communities with integrity, respect, and transparency.
Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (Ireland) Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, Belvedere Advisors LLC and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 22 U.S. states and Washington, D.C., and across 23 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of June 30, 2021, Northern Trust had assets under custody/ administration of US $15.7 trillion, and assets under management of US $1.5 trillion. For more than 130 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit northerntrust.com or follow us on Twitter @NorthernTrust.
Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Please read our global and regulatory information.
* ESG investing is defined as utilizing environmental, social, and governance (ESG) criteria as a set of standards for a company’s operations that socially conscious investors use to screen potential investments.
** The Northern Trust ESG Vector Score is designed to rank companies based on their management of and exposure to material ESG metrics. The Score was designed to align with the Sustainability Accounting Standards Board (SASB) Standards. The SASB Standards were designed for investors and focus on only financially material issues based on the industry in which the company operates. Based on that structure, the ESG Vector Score is a combination of individual ESG indicators, adjusted for industry membership. Click here to learn more.
Before investing, carefully consider the FlexShares investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by visiting www.flexshares.com. Read the prospectus carefully before you invest.
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An investment in FlexShares is subject to numerous risks, including possible loss of principal. Fund returns may not match the return of the respective indexes. A full description of risks is in the prospectus.
The funds are passively managed meaning NTI does not attempt to take defensive positions in any market conditions, including declining markets. The funds employ a representative sampling strategy, and therefore, may incur tracking error. Because the funds include and exclude securities based on ESG factors, the Funds may underperform the broader equity market or other funds that do or do not use ESG investment criteria. Although the underlying indexes are designed to measure a portfolio of companies with certain ESG characteristics, there is no assurance that the underlying indexes or funds will be comprised of such securities. The funds are non-diversified meaning performance may depend on a small number of issuers. The funds may experience increased volatility if investments are concentrated in a particular region, country, market, industry, sector or asset class. The funds may use derivatives which involve increased risks different from more traditional securities.
FEDM invests in foreign securities which may result in rapid and extreme changes in value due to less liquid markets, tariffs and trade disputes and adverse economic, political, diplomatic, environmental, financial, and regulatory factors. Investments in Japan and Europe are subject to additional risks due to political, social, and economic uncertainty. Mid cap stocks may be subject to more abrupt or erratic market movements than larger companies.
FEHY and FEIG invest in debt securities which involve credit risk and typically decrease in value when interest rates rise. Active and frequent trading can subject the funds to increased transaction costs. FEHY invests in high yield securities which are subject to greater credit risk, price volatility and risk of loss than investment grade bonds. Corporate debt securities are subject to the risk that the issuer is unable to make principal and interest payments. Investments in bonds of non-US issuers may involve certain risks that are greater than those associated with US issuers.