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Key Benefits
Key Benefits
About Northern Trust Asset Management
About Northern Trust Asset Management
Comprehensive Framework
Comprehensive Framework
The Methodology
The Methodology
About ESG Vector Score
About ESG Vector Score
THE NORTHERN TRUST ESG VECTOR SCORE
Northern Trust Asset Management is a global investment manager that helps investors navigate changing market environments in efforts to realize their long-term objectives.
Entrusted with US$1 trillion in assets as of December 31, 2022, we understand that investing ultimately serves a greater purpose and believe investors should be compensated for the risks they take — in all market environments and any investment strategy. That’s why we combine robust capital markets research, expert portfolio construction and comprehensive risk management in an effort to craft innovative and efficient solutions that seek to deliver targeted investment outcomes.
As engaged contributors to our communities, we consider it a great privilege to serve our investors and our communities with integrity, respect, and transparency.
About Northern Trust
Asset Management
4
Assists in prioritizing corporate engagements, further aligning sustainable investments and stewardship
Assists in prioritizing corporate engagements, further aligning sustainable investments and stewardship — leading to more deliberate engagements and the ability to track progress over time with a consistent metric.
3
Offers more precision in identifying ESG-related business risks that could impact its performance
Offers more precision in identifying ESG-related business risks that could impact its performance, whether constructing portfolios using best-in-class security selection or exclusionary techniques.
2
Provides a consistent, transparent methodology to gain greater clarity when building and managing sustainable portfolios
Provides a consistent, transparent methodology to gain greater clarity when building and managing sustainable portfolios
by focusing on the magnitude and direction of key ESG-related business issues likely
to have a financial impact
on companies.
1
Enables more intentional and transparent integration of ESG considerations into investment processes
Enables more intentional and transparent integration of ESG considerations into investment processes, addressing the need for a consistent way to measure and report on ESG investments.
Key Benefits
Company XYZ
In a human capital intensive industry such as Air Freight & Logistics, how a company manages this ESG business issue can impact how well it performs.
EXAMPLE: HUMAN CAPITAL CRITERIA
Is the company located in a country with strict working standards?
Is the company actively working to decrease the frequency of health and safety issues?
Forward View
How has the company performed relative to industry peers on health and safety issues?
Peer View
How has the company managed employee safety programs and certifications?
What are the employee injury rates?
Historical View
Appreciating that ESG reporting and requirements are continually maturing, the ESG Vector Score framework was intentionally designed as open-architecture, allowing for the flexibility of incorporating additional best-in-class data as it becomes available.
And, in a quickly evolving field, its open architecture design means it can adapt to support multiple data sources and new industry requirements over time, so this can be a foundational metric used for years to come.
A Comprehensive Framework, Designed to Last
Source: SASB
Leadership
& Governance
Systemic Risk Management
Critical Incident Risk Management
Management of the
Legal & Regulatory Environment
Competitive Behavior
Business Ethics
Leadership
& Governance
Business Model
& Innovation
Physical Impacts
of Climate Change
Materials Sourcing
& Efficiency
Supply Chain
Management
Business Model
Resilience
Product Design & Lifecycle Management
Business Model
& Innovation
Human Capital
Employee Engagement,
Diversity & Inclusion
Employee Health
& Safety
Labor Practices
Human Capital
Social Capital
Selling Practices
& Product Labeling
Customer Welfare
Product Quality
& Safety
Access & Affordability
Data Security
Customer Privacy
Human Rights &
Community Relations
Social Capital
Environment
Ecological Impacts
Waste & Hazardous
Materials Management
Water & Wastewater
Management
Energy Management
Air Quality
Greenhouse Gas (GHG) Emissions
Environment
Sustainability-Related
Business Issues
Guided by SASB Standards, the ESG Vector Scoring process identifies sustainability issues that are likely to affect the financial condition or operating performance of companies within a given industry.
FOCUSING ON FINANCIALLY MATERIAL ESG ISSUES
This industry-first approach marries two leading sustainability reporting frameworks — the Sustainability Accounting Standards Board’s (SASB) Standards, which are industry-specific sustainability disclosure standards focused on financial materiality, and the thematic structure of the Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations.
It applies TCFD’s anticipatory framework on governance, strategy and risk management — beyond simply climate — to all financially material ESG risks across the SASB Standards, resulting in a comprehensive risk assessment. Additionally, the Score places a further emphasis on corporate governance because of the impact it can have on long-term value.
The Methodology
Forward-looking risk assessment framework
Direction
ESG issues that are reasonably likely to impact financial performance
Magnitude
Northern Trust
ESG Vector Score
captures both the
magnitude and direction
of a company's potential
ESG-related business risks.
As the demand for environmental, social and governance (ESG) investing has accelerated, so too has the number of data providers — each with varying information, reporting components and levels of transparency. This has created significant confusion and subjectivity for investors to assess the magnitude and direction of individual companies' ESG-related issues.
Investors have expressed the need for a more transparent and disciplined framework that focuses only on the ESG-related business issues that could impact the financial condition of a company — and ultimately their portfolio’s investment return.
Aligned with Northern Trust Asset Management’s philosophy that investors should be compensated for the risks they take, the methodology leverages the firm’s extensive quantitative and sustainable investing experience — capturing both the magnitude and direction of potential ESG-related risks.
The Northern Trust ESG Vector Score is a measurement that assesses publicly traded companies in the context of financially relevant environmental, social and governance (ESG) related criteria that could impact their operating performance.
Vector (vec•tor | vekter) = a quantity that has both magnitude and direction.
of the world’s most sophisticated and progressive investors.
About Northern Trust Asset Management
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About Northern Trust
Asset Management
About Northern Trust
Asset Management
Comprehensive Framework
Comprehensive Framework
The Methodology
The Methodology
About ESG Vector Score
About ESG Vector Score
Key Benefits
Key Benefits
Demonstrated leadership:
•
• Best performing U.S. asset manager —
• Founding signatory of Climate Action 100+
• 12 of 15 PRI Assessment Metrics at or Above Median (2021 PRI report published 9/08/2022)***
• TCFD Supporter
• SASB Investor Advisory Group Member
* As of December 31, 2022.
** ShareAction ranked asset managers from IPE's 2022 top 500 asset managers based on the following criteria: world's largest 29 asset managers based on AUM, next largest 29 European asset managers based on AUM, next largest 10 U.K. asset managers based on AUM.
*** For the full Northern Trust PRI Transparency Report, visit www.unpri.org. Assessment methodology can be found at https://www.unpri.org/reporting-and-assessment/how-investors-are-assessed-on-their-reporting/3066.article.
Above rankings are not indicative of future performance.
TM
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.
For Asia-Pacific, this material is directed to expert, institutional, professional and wholesale clients only and should not be relied upon by retail investors. The Northern Trust Company of Hong Kong Limited (TNTCHK) is regulated by the Hong Kong Securities and Futures Commission. In Singapore, TNTCHK, Northern Trust Global Investments Limited (NTGIL), and Northern Trust Investments, Inc. are exempt from the requirement to hold a Financial Adviser’s Licence under the Financial Advisers Act and a Capital Markets Services Licence under the Securities and Futures Act with respect to the provision of certain financial advisory services and fund management activities. In Australia, TNTCHK is exempt from the requirement to hold an Australian Financial Services Licence under the Corporations Act. TNTCHK is authorized and regulated by the SFC under Hong Kong laws, which differ from Australian laws.
Issued in the United Kingdom by Northern Trust Global Investments Limited. Issued in the EEA by Northern Trust Fund Managers (Ireland) Limited.
The information contained herein is intended for use with current or prospective clients of Northern Trust Asset Management. The information is not intended for distribution or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. Northern Trust and its affiliates may have positions in and may effect transactions in the markets, contracts and related investments different than described in this information. This information is obtained from sources believed to be reliable, and its accuracy and completeness are not guaranteed. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor. Opinions and forecasts discussed are those of the author, do not necessarily reflect the views of Northern Trust and are subject to change without notice.
This report is provided for informational purposes only and is not intended to be, and should not be construed as, an offer, solicitation or recommendation with respect to any transaction and should not be treated as legal advice, investment advice or tax advice. Recipients should not rely upon this information as a substitute for obtaining specific legal or tax advice from their own professional legal or tax advisors. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. Indices and trademarks are the property of their respective owners. Information is subject to change based on market or other conditions.
Investing involves risk — no investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Products and services provided by subsidiaries of Northern Trust Corporation may vary in different markets and are offered in accordance with local regulation. For more information, read our legal and regulatory information about individual market offices (available at northerntrust.com/terms-and-conditions).
An Environmental, Social and Governance (ESG) strategy’s use of ESG factors and screening process may screen out certain companies and industries and/or affect exposures to certain companies or industries. An ESG strategy utilizes ESG analytics as a risk mitigation tool not as an alpha driver and may cause the strategy to forego certain investment opportunities. Investors can integrate ESG data to create a more holistic view of risks and opportunities — resulting in more informed investment decisions and resilient portfolios.
Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (Ireland) Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, Belvedere Advisors LLC, Northern Trust Asset Management Australia Pty Ltd, and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.
© 2023 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A.
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Learn how Northern Trust Asset Management is bringing clarity to ESG investing.
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Provides a consistent, transparent methodology to gain greater clarity when building and managing sustainable portfolios
by focusing on the magnitude and direction of key ESG-related business issues likely
to have a financial impact
on companies.
Insights & Research
About
What We Do
Who We Serve
The example below provides a lens into how the ESG Vector Score examines a company’s management of human capital, with respect to employee health and safety considerations.
In a human capital intensive industry such as Air Freight & Logistics, how a company manages this ESG business issue can impact how well it performs.
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Key Benefits
Dive deeper into how it works
To explore the Northern Trust ESG Vector Score in-depth, download the detailed brief.
Get the Brief
Get the Brief
Download Fact Sheet
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View Current NT ESG Vector Scores
of experience managing socially responsible portfolios for many of the world’s most sophisticated and progressive investors
ABOUT SUSTAINABLE INVESTING
IMPORTANT INFORMATION
30+ years
Sustainable Investing Leadership
Best performing U.S. asset manager — ShareAction “Voting Matters, 2022”
Published 1/17/2023. NTAM ranked first among U.S. asset managers & 23rd globally**
of AUM* in sustainable strategies
$137 billion
•
12 of 15 PRI Assessment Metrics at or Above Median
•
TCFD Supporter
•
Founding signatory of Climate Action 100+
•
SASB Investor Advisory Group Member
•
(2021 PRI report published 9/08/2022)***