Northern Trust Asset Management has expanded its sustainability solutions with the launch of a unique, sustainable emerging market green transition index strategy, with climate change considerations as a cornerstone.
The strategy complements the asset manager’s existing World Green Transition Index strategy, launched in 2019. Together the strategies, using the MSCI World Index and the MSCI Emerging Markets Index as their parent indices, offer investors globally, subject to local distribution rules, the ability to obtain climate-aware exposure to the MSCI ACWI universe via custom indices designed by Northern Trust Asset Management and managed by MSCI.
“We are pleased to offer this latest strategy which enables our clients exposure to equities that combine ESG screens with a climate aware approach, whilst harnessing the exposure to emerging markets,” says Valeria Dinershteyn, senior sustainable investing strategist, for Europe, Middle East, Africa and Asia-Pacific at Northern Trust Asset Management.
“Our strategy enables the incorporation of climate change considerations into a rules-based equity solution and revolves around five distinct climate-aware components to intelligently hedge the risks, and, importantly, incorporate the investment opportunities of tomorrow’s world. The result is a close to 70 percent reduction in carbon emissions intensity and almost 100 percent in potential carbon emissions of the strategy against the parent benchmark.” (according to MSCI data)
The Northern Trust sustainable emerging markets green transition index strategy will combine Northern Trust’s proprietary Environmental, Social and Governance (ESG) exclusion approach with screens to minimise climate related risks and include positive tilts to maximise opportunities to benefit from the transition to a low carbon economy.
Screens applied include fossil fuel exclusions (with the strategy fully fossil-fuel free, excluding companies with fossil-fuel reserves), and energy screen, to minimise current and potential exposure to carbon emissions and reduce exposure to any other associated risks. Positive tilts are then applied to companies with green revenues and a strong climate strategy by using the innovative MSCI Transition Risk Management Score.
“The strength and uniqueness of this strategy is in how it incorporates the opportunities of climate change alongside the hedging of risks, thereby increasing exposure to companies with either green revenues (such as alternative energy or energy efficiency) or a strong long-term climate policy and robust carbon reduction targets,” says Marie Dzanis, head of Northern Trust Asset Management in Europe, Middle East and Africa (EMEA). “This latest strategy underlines Northern Trust Asset Management’s continued innovation, industry collaboration and focus on sustainability. We strive to ensure we meet our clients’ needs and better serve investors on their journey to a lower carbon economy.”