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Northern Trust launches ESG equity index fund

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The asset management arm of Northern Trust has launched the Northern Trust World Custom ESG Equity Index Fund.

The fund, which has been customised according to six common value based exclusions, enables institutional investors across the globe to meet commonly held environmental, social, and governance (ESG) criteria and support their investment objectives.

“Throughout Europe, we see an increasing trend among institutional investors looking to include ESG criteria in their investment portfolios,” says John Krieg, managing director of Northern Trust asset management in Europe, Middle East and Africa. “Through the launch of this fund, we are able to respond to the most important ESG themes identified by our clients, and include the benefits associated with a pooled fund structure.”

Northern Trust’s customised index fund has been created based on six key common areas – environment, human rights, anti-corruption, labour and supply chain, tobacco suppliers/producers, and controversial/indiscriminate weapons.

Northern Trust’s ESG screening methodology then excludes companies in these areas which:
• Do not comply with United Nations (UN) Global Compact Principles
• Derive more than five per cent of revenues from the tobacco industry
• Have any involvement in the production of cluster bombs, landmines, nuclear weapons, deplete uranium weapons, biological/chemical weapons, or their related components

“Northern Trust engaged with a number of our institutional clients across Europe to identify any commonalities in the way that investors implement ESG screening criteria in developed and emerging markets,” says Mamadou-Abou Sarr, senior product specialist for global index management at Northern Trust. “This consultative approach offered us excellent insight into the various questions that investors had on human rights, labour, environment and anti-corruption.”

The fund is structured as a Common Contractual Fund which offers tax-transparency through exercising withholding tax treaties that exist between countries in which investors are based, and those in which they invest. Over the long-term, investors using tax-transparent structures may benefit from enhanced investment returns owing to reduced tax drag.

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