Simple and Efficient ESG Integration for Your Clients’ Portfolios

As the demand for environmental, social, and governance-driven investing has increased, so has the need for accurate and reliable data. The FlexShares CORE ESG ETFs utilize the Northern Trust Vector Score to measure the magnitude of ESG issues that are likely to impact current financial performance and utilize a forward-looking directional risk assessment of how a company may handle future issues.

In the upcoming webcast, Simple and Efficient ESG Integration for Your Clients’ Portfolios, Northern Trust Asset Management’s head of product strategy, Crystal McClenthen, and Michael Natale, head of intermediary distribution, will discuss the importance of combining both in order to give investors the ESG impact of an asset’s value over the long term.

For example, the recently launched FlexShares ESG & Climate US Large Cap Core Index Fund (FEUS), FlexShares ESG & Climate Developed Markets ex-US Core Index Fund (FEDM)FlexShares ESG & Climate Investment Grade Corporate Core Index Fund (FEIG), and FlexShares ESG & Climate High Yield Corporate Core Index Fund (FEHY) can help investors access the ESG theme.

The four new climate ETFs add to FlexShares’ existing ESG ETF offerings, the FlexShares STOXX US ESG Select Index Fund (ESG) and the FlexShares STOXX Global ESG Select Index Fund (ESGG). The new fund suite seeks to help investors improve their portfolios’ overall ESG scores and reduce carbon risk while maintaining core equity and fixed income exposure. The funds utilize the Northern Trust ESG Vector Score and a carbon risk rating to hedge ESG-related risks and capitalize on sustainable opportunities.

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 impacting the company’s financial statements and the portfolio’s performance.

With climate change a top concern among many investors and regulators globally, each core ESG ETF suite strategy 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.

“Building on our experience in managing quantitative and sustainable strategies, we are delighted to combine our proprietary exclusionary screening, ESG scoring and climate related data, and well defined portfolio construction constraints to offer strong sustainability profiles in a suite of core strategies. These funds remain true to the traditional core approach while meeting the growing demand for investments that target conscientious corporate governance, low environmental impact and socially responsible business practices,” according to FlexShares.

Financial advisors who are interested in learning more about ESG strategies can register for the Wednesday, October 6 webcast here.