Responsible Investing Practice at Northern Trust

Responsible Investing Practice at Northern Trust

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Northern Trust is an advocate of the highest #ESG standards. Read more from the 2014 #CSR Report @NTCSR
Wednesday, December 16, 2015 - 8:35am

CAMPAIGN: 2014 Corporate Social Responsibility Report

CONTENT: Article

Responsible Investing Principles

Northern Trust is an advocate of the highest ESG standards. We fully acknowledge that the long-term financial success of our clients and shareholders depends on a healthy global environment, a stable society and well-functioning companies. In our daily operations and strategic planning, we strive to mitigate our environmental impact and improve our social and governance procedures. As a leading investment manager and financial service provider, we recognize our additional influence and responsibility. We are committed to:

  • Expanding our understanding of ESG concepts and their impact on economic value;
  • Integrating ESG analysis into investment decisions as appropriate;
  • Encouraging companies we invest in to pursue and disclose sustainable business practices; and
  • Voting proxies consistent with these principles as appropriate.

Northern Trust has more than 25 years of experience managing socially responsible portfolios and more than $62.6 billion in socially screened AUM as of December 31, 2014. Northern Trust stock is also included in FTSE 4Good Index and Dow Jones Sustainability Index, ECPI Global Ethical Equity and MSCI World ESG Index, MSCI World SRI Index, and MSCI KLD 400 Social Index.

Responsible Investing Practice

Our Corporate Social Responsibility strategy is integrated into our core business strategy. This means we collaborate with our clients and acknowledge our responsibility in supporting sustainable business relationships. We proudly advocate corporate citizenship, philanthropy and support for the diverse communities and environments in which we operate. As such we have appointed a Managing Director of Environmental, Social and Governance (ESG) investing at Northern Trust Asset Management. Mamadou-Abou Sarr is responsible for ESG innovation and product development across our array of asset class capabilities. Mamadou has a key role to proactively develop new ideas to ensure that ESG thinking remains central to our business development. Additionally, Northern Trust has established an ESG Council to push forth our multi-asset class capabilities in order to deliver strategies and solutions to meet our client’s unique investment and ESG objectives. The council is made up of 11 professionals from across the organization that represents various stakeholder groups, such as equities, fixed income, wealth management, and risk management.

We expect demand to grow and more allocation to RI strategies in the years ahead. This growth represents an opportunity for Northern Trust to offer products and services that help differentiate our brand. Consistent with this belief, Northern Trust Asset Management:

  • Provides investment oversight solutions for institutional investors that incorporate comprehensive analysis, investment insights and monitoring at the total-plan level and across asset class portfolios that include ESG exposures in addition to traditional market-risk based metrics.
  • Maintains full connectivity with the leading ESG and SRI data providers such as Trucost, MSCI, ECPI, Sustainalytics, FTSE, etc.

Our Global Sustainability Mutual Fund is designed to adhere to widely accepted sustainability principles, duplicate the MSCI World ESG Index and incorporate MSCI ESG Research’s Intangible Value Assessment (IVA) methodology. This strategy now has close to $200 million in AUM.

As ESG data has evolved, so too has our approach to data usage. More recently, we successfully worked with third parties to build strategies that incorporate ESG research. Current strategies include Northern Trust World Custom ESG, Northern Trust Emerging Markets ESG and Northern Trust Emerging Markets Low Carbon. Our quantitative research team is on the forefront of using ESG datasets to construct research portfolios forming the foundation for several initiatives. These relate to using ESG data in a factor-based framework. By integrating quality and other factors such as ESG and low carbon, we engineered a targeted universe to track based on our clients’ requirements. Our proprietary Northern Trust World Quality Low Carbon solution provides exposure to high-quality companies while reducing portfolio exposure to carbon emissions and potential carbon emissions from fossil fuel reserves. The solution aims to combine the virtues of factor-based strategy with a low-carbon approach while controlling for other risks. This product is currently available for clients to use as a separately managed account on a tax-advantaged equity platform.

Click here to read more from the 2014 Corporate Social Responsibility Report