In an interview with Marie Dzanis, head of intermediary distribution for Northern Trust Asset Management [NTRS], RIA Channel’s Julie Cooling discusses ESG (Environmental, Social and Governance), current markets trends, and the newly available Northern Trust ETF products designed to enhance any portfolio.
Pick of the Month: FlexShares ESG & ESGG
As the season for giving continues and investors spread their holiday cheer, newly launched funds focused on ESG criteria provide a unique opportunity for investors to combine their principal values with their investment selections. In response, managers and advisors have become more focused to incorporate specified ESG investments into client portfolios.
Traditionally, socially responsible investing (SRI) has been an investment style used to include or exclude specific companies from portfolios based on criteria that is significant to the investor. The majority of SRI investment strategies omit certain companies based on their engagement within certain areas such as alcohol and tobacco or adhering to labor laws.(i).
ESG or “environmental,” “social,” “governance,” investing refers to sustainability, or set of standards for a company’s daily operations that are considered by socially aware investors. These factors may include criteria such as how a company supports the environment, how they manage relationships with employees, and shareholder rights (ii). ESG is a rapidly growing market that currently holds more than $21 trillion in global assets (iii).
Northern Trust Corporation (Nasdaq: NTRS), with $946 billion in assets under management, believes in the ability to achieve high portfolio performance while also maintaining personal values (iv). Recently, the firm launched two ESG focused ETFs:FlexShares STOXX US ESG Impact Index Fund ETF (Nasdaq: ESG) and FlexShares STOXX Global ESG Impact Index Fund (Nasdaq: ESGG), in an effort to provide clients with investment options that support ESG factors while still providing high returns. By partnering with STOXX, a globally integrated index provider, NTRS now has access to domestic and international companies based on Key Performance Indicators (KPIs) in ESG categories and provides investors with scalable options for sustainable investing. (v).
The FlexShares ESG ETF is designed to serve as a core equity holding with ESG exposure to enhance risk adjusted returns. ESG is a passively managed ETF tracking the STOXX US ESG Impact Index. The top holdings in the fund include Apple (APPL), Microsoft (MSFT), Exxon (XOM), and General Electric (GE) (vi).
The FlexShares ESGG ETF seeks investment returns that correspond to the price and yield performance, before fees and expenses, of the STOXX Global ESG Impact Index. This index assesses companies throughout the world based on a specifically selected set of environmental, social and governance KPIs to positively impact shareholder equity. Similar to ESG, ESGG can also serve as a core holding within a portfolio (vi).
As ESG continues to trend in the market place, funds such as ESG and ESGG provide unique opportunities and exposure for investors. In response to this growing investment trend, companies are now highlighting ESG factors that they follow in their daily practice to encourage investments from portfolio managers, advisors and direct investors.