Northern Trust has improved its analytical capabilities to provide pension funds and other global institutional investors with insights and transparency over their environmental, social and governance (ESG) risk exposures.
The ESG Analytics Summary, prepared by Northern Trust’s Investment Risk and Analytical Services group, provides investors with periodic snapshot analysis across their equity and corporate bond portfolios – setting out investment ‘scores’ against a range of ESG factors, United Nation’s (UN) Global Compact principles and business activity flags.
This detailed analysis enables investors to track changes in a fund’s ESG profile over time, compare results on an absolute and relative basis, and compare asset managers’ scores against each other. These insights are generated by combining Northern Trust’s extensive global custody asset information with data provided in partnership with information services provider IdealRatings.
Institutions can use the resulting data to support their governance and oversight objectives – for example, providing evidence of their ESG scores and exposures and supporting adherence to regulatory requirements and global standards. It can be used to facilitate discussions with their investment managers and manage potential stakeholder concerns and reputational risk.
ESG analytics can also supplement traditional investment analytics – providing a more holistic view of investment risks, exposures and opportunities. For example, during volatile market conditions, understanding the strength of a company’s governance structures and processes can give investors a timely and more complete picture of its resiliency.
Serge Boccassini, product lead, Investment Accounting and Analytic Solutions at Northern Trust, says: “ESG rules play a heightened role in global investor considerations, with institutions increasingly seeking to integrate sustainability factors into their portfolios. To achieve that effectively, it is vital they understand their investment risks. Our analysis provides insights into clients’ ESG exposures to help them identify financial risks and opportunities – and help ensure their investments continue to be aligned with their values.”
Mohamed Donia, CEO of IdealRatings, says: “We are delighted to partner with Northern Trust to provide insights into global investors’ portfolio exposures. The ESG Analytics Summary provides enhanced transparency to help investors avoid companies that pose a greater financial risk due to their ESG practices – as well as satisfy regulatory requirements and meet global standards.”
Northern Trust’s Investment Risk and Analytical Services group provides asset owners and asset managers around the world with innovative analytical solutions, supporting over USD5 trillion (as at 31 December 2019) in assets under measurement. With consultants in Chicago, London, Singapore and Melbourne, the group provides performance measurement, risk analysis and investment compliance monitoring – enabling clients to gain greater insights into their investments for more informed decision making.
Northern Trust’s Investment Risk and Analytical Services ESG analytics are complemented by the extensive capabilities of its asset management business. Entrusted with USD975 billion of investor assets, Northern Trust Asset Management has more than 30 years of sustainable investing expertise and innovation, has been a signatory to the Principles of Responsible Investment since 2009, and manages four of the top 10 largest Sustainable Investing index funds globally (source: eVestment data as of December 31, 2019).
