Northern Trust Asset Management’s FlexShares Exchange Traded Funds announced today the launch of a new ESG ETF focused on climate with exposure to emerging markets: the FlexShares ESG & Climate Emerging Markets Core Index Fund (NYSE: FEEM).
The firm writes that this fund builds on FlexShares’ existing climate suite introduced in September 2021, which currently includes US large cap equities, developed markets ex-US equities, and two fixed-income ETFs.
The FEEM fund will align with the broader suite’s strategy, which seeks to help investors improve their portfolio’s overall ESG score and reduce carbon risk while maintaining core equity exposure. The full suite utilizes the Northern Trust ESG Vector Score as well as a carbon risk rating in an effort to hedge ESG-related risks and capitalise on sustainable opportunities.
The ESG Vector Score methodology, developed by Northern Trust Asset Management (NTAM), seeks to identify ESG-related business issues most likely to impact a company’s financial performance and a portfolio’s investment return. This is combined with a special focus on carbon risk. In partnership with Institutional Shareholder Services (ISS), each company is examined using a carbon risk rating methodology to determine its current carbon emissions, its efforts to reduce its carbon footprint, and its potential exposure to carbon-risk relative to other companies in its industry. The fund targets a reduction in aggregate carbon emissions and carbon reserves relative to its parent index, while also targeting an overall improvement in its carbon risk rating.
“The addition of the FlexShares ESG & Climate Emerging Markets Core Index Fund will complement FlexShares’ existing climate funds, providing investors a diverse set of core sustainability products they can use for exposure across the globe,” says Crystal McClenthen, Head of Product Strategy, Funds and Managed Accounts at NTAM. “The combination of our ESG Vector Score and carbon risk rating creates a transparent and consistent approach to ESG measurement, which is particularly important when it comes to identifying opportunities in emerging markets.”
Darek Wojnar, Head of Funds and Managed Accounts for NTAM, says: “Our central focus at FlexShares is to meet investor goals with innovative solutions, and increasingly that means supporting clients’ sustainability objectives. We believe our deep sustainability expertise and proprietary quantitative models will help investors gain core exposure to global markets while benefitting from the transition to a low-carbon economy.”
