The NT World Quality ESG Strategy Expands Manager’s Sustainable Quantitative Global Offering in EMEA and APAC

Northern Trust Asset Management (NTAM), one of the world’s leading investment managers, has expanded its suite of responsible quantitative investment solutions, with the launch of the NT World Quality ESG Strategy, which has been available for U.S. investors since 2015.

The strategy seeks to efficiently target high-quality stocks and companies with higher relative environmental, social and governance (ESG)-ratings whilst defining a responsible investment universe and managing climate change risk. The strategy will be accessible to investors in certain jurisdictions across Europe and Asia-Pacific.

The strategy incorporates the hallmarks of NTAM’s responsible quantitative investment solutions, including a focus on quality companies and a strong emphasis on controlling risk.

“We believe material environmental, social and governance factors are pre-financial indicators that can affect a company’s future financial viability and clients’ long-term risk-adjusted investment returns. When managed well, they can position a company for success and when mismanaged, they can result in significant risks,” said Julie Moret, global head of sustainable investing and stewardship at NTAM. “The intersection of high quality and highly rated ESG and quality factors means investors in this strategy may benefit from both factor-based investing and ESG characteristics.

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The NT World Quality ESG Strategy takes a holistic view on sustainability that incorporates both financial quality and ESG profile into security selection. The approach enables investors to access a differentiated ESG integration that not only incorporates ESG metrics, but removes exposure to certain lower-scoring ESG securities, and seeks to reduce carbon footprint relative to the benchmark, with the existing strategy delivering a 64 percent reduction in CO2 intensity and an 81 percent reduction in CO2 potential emissions (as at March 31, 2022).

Michael Hunstad, head of quantitative strategies at NTAM, said: “For more than 25 years, we have been researching and managing quantitative active strategies using factors to provide systematic, targeted exposure to compensated equity risks. Our proprietary quality score augments the quality bias found in many ESG strategies whilst our portfolio construction techniques seek to avoid uncompensated risks.”

NTAM is a founding member of the One Planet Asset Manager Initiative, which sees member asset managers commit to advance the understanding of the implications of climate-related risks and opportunities within long-term investment portfolios through engagement, research and sharing of investment practices. It is also a founding member of the Climate Action 100+ initiative that engages with 166 companies representing 80% of corporate greenhouse gas emissions globally and a supporter of the Financial Stability Board Task Force on Climate-related Financial Disclosure (TCFD) – a consortium established in 2015 to develop a voluntary, consistent framework for use by companies to disclose climate-related financial risk to investors and other stakeholders.

Entrusted with more than US$1 trillion of investor assets, including $100+ billion in sustainable investing assets under management (as of 30 June, 2022), NTAM is among the world’s largest investment managers.

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At Northern Trust Asset Management (“NTAM”), we define Sustainable Investing as encompassing all of NTAM’s investment strategies and accounts that utilize values based and norms based screens, best-in-class and ESG integration, or thematic investing that may focus on a specific ESG issue such as climate risk. NTAM’s Sustainable Investing includes portfolios designed by NTAM as well as those portfolios managed to client-defined methodologies or screens. As the data, analytical models and aforementioned portfolio construction tools available in the marketplace have evolved over time, so too has NTAM. NTAM’s Sustainable Investing encompasses strategies and client assets managed in accordance with client specified responsible investing terms (historically referred to as Socially Responsible), as well as portfolios that leverage contemporary approaches and datasets, including ESG analytics and ESG thematic investing.

Source: Northern Trust Asset Management