Getting hyper-focused on climate change is now possible for niche-focused environmental, social, and governance (ESG) investors in developed markets with the introduction of the FlexShares ESG & Climate Developed Markets ex-US Core Index Fund (FEDM).
The fund seeks investment results that correspond generally to the price and yield performance of the Northern Trust ESG & Climate Developed Markets ex–U.S. Core Index. Best of all, the fund comes with a low net expense ratio of 0.12%, which is remarkably lower than its category average.
As noted on its launch sheet, FEDM:
- Is designed as a cost–effective core building block of a portfolio incorporating risk controls to reduce tracking error and deliver market-like exposure relative to the starting universe.
- Applies a multi–dimensional ESG Framework incorporating exclusions across ESG controversies and business involvement while seeking to deliver ESG uplift.
- Uses the Northern Trust ESG Vector Score, which is focused on financial materiality and aligned with industry standards Sustainability Accounting Standards Board (SASB) and Tax Force on Climate Related Disclosures (TCFD), integrating not only historic metrics and indicators, but also those that assess how exposed a company may be to future risks and opportunities.
- Places intentional emphasis on reducing climate transition risk by reducing ISS carbon emissions intensity and improving ISS Carbon Risk Rating.
Powered by a Vector Score
With the ESG universe becoming even more vast by the minute, it’s important to incorporate a strategy into a fund that not only captures gains, but also adds quality holdings to the ETF. This is where FlexShares adds a Vector Score mechanism as part of FEDM.
“Part of a suite of funds that are designed to incorporate a comprehensive risk assessment across financially material ESG issues and by placing intentional emphasis on reducing climate transition related risks,” the FEDM launch sheet explained. “The Funds draw on the Northern Trust ESG Vector Score which is a robust evaluation of financially material ESG issues incorporating both forward–looking and historically aware evaluation of financially material Environmental, Social and Governance (ESG) issues. The suite also seeks to reduce the climate transition risk of the resulting portfolio while maintaining market like exposure relative to its respective parent index.”
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