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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.
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-class¹ 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 purposeful and transparent integration of ESG considerations into investment processes
Enables more purposeful 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 world 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 Assessment, Designed to Last
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 disclosure 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.
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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
* As of June 30, 2024.
** ShareAction ranked asset managers from IPE's 2023 top 500 asset managers based on the following criteria: world's largest 35 asset managers based on AUM, next largest 34 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. Northern Trust Asset Management (NTAM) 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, Northern Trust Asset Management Australia Pty Ltd, and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company. Issued in the United Kingdom by Northern Trust Global Investments Limited, issued in the European Economic Association (“EEA”) by Northern Trust Fund Managers (Ireland) Limited, issued in Australia by Northern Trust Asset Management (Australia) Limited (ACN 648 476 019) which holds an Australian Financial Services Licence (License Number: 529895) and is regulated by the Australian Securities and Investments Commission (ASIC), and issued in Hong Kong by The Northern Trust Company of Hong Kong Limited which is regulated by the Hong Kong Securities and Futures Commission. For Asia-Pacific (APAC) and Europe, Middle East and Africa (EMEA) markets, this information is directed to institutional, professional and wholesale clients or investors only and should not be relied upon by retail clients or investors. For U.S. NTAM, the information contained herein is intended for use with all current or prospective clients of Northern Trust Investments, Inc (NTI). This document may not be edited, altered, revised, paraphrased, or otherwise modified without the prior written permission of NTAM. 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. NTAM 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, its accuracy and completeness are not guaranteed, and is subject to change. 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. 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. All securities investing and trading activities risk the loss of capital. Each portfolio is subject to substantial risks including market risks, strategy risks, advisor risk, and risks with respect to its investment in other structures. There can be no assurance that any portfolio investment objectives will be achieved, or that any investment will achieve profits or avoid incurring substantial losses. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Risk controls and models do not promise any level of performance or guarantee against loss of principal. Any discussion of risk management is intended to describe NTAM’s efforts to monitor and manage risk but does not imply low risk. Past performance is not a guarantee of future results. Performance returns and the principal value of an investment will fluctuate. Performance returns contained herein are subject to revision by NTAM. Comparative indices shown are provided as an indication of the performance of a particular segment of the capital markets and/or alternative strategies in general. Index performance returns do not reflect any management fees, transaction costs or expenses. It is not possible to invest directly in any index. Net performance returns are reduced by investment management fees and other expenses relating to the management of the account. Gross performance returns contained herein include reinvestment of dividends and other earnings, transaction costs, and all fees and expenses other than investment management fees, unless indicated otherwise. For U.S. NTI prospects or clients, please refer to Part 2a of the Form ADV or consult an NTI representative for additional information on fees. Forward-looking statements and assumptions are NTAM’s current estimates or expectations of future events or future results based upon proprietary research and should not be construed as an estimate or promise of results that a portfolio may achieve. Actual results could differ materially from the results indicated by this information. ©2024 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A.
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.
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.
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
View Current NT ESG Vector Scores
About Northern Trust Asset Management 30+ years of experience managing sustainable portfolios for many of the world’s most sophisticated and progressive investors Sustainable Investing Leadership
$177 billion of AUM* in sustainable investing strategies
Top performing U.S. Index Asset Manager — ShareAction “Voting Matters, 2023” Published 1/11/2024. NTAM ranked 33rd overall globally & 2nd among U.S. index asset managers**
Founding signatory of Climate Action 100+
TCFD Supporter
SASB Investor Advisory Group Member
8 of 14 PRI Assessment Metrics at or Above Median (2023 PRI report published 12/15/2023)***
TM
TM
TM
TM
TM
Source: Northern Trust Asset Management, SASB, IFRS Foundation, November 2023. See SASB Materiality Map for additional details.
¹Best-in-class ESG is industry terminology referring to an investment approach that selects companies that are leaders in implementing ESG.
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Contact Us
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Northern Trust Asset Management is a global investment manager that helps investors navigate changing market environments, so they can confidently realize their long term objectives.
Entrusted with more than $1.2 trillion in assets as of March 31, 2024, we understand that investing ultimately serves a greater purpose. We 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 to craft innovative and efficient solutions that 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
By clicking "Submit", I agree to the Northern Trust
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Learn how Northern Trust Asset Management is bringing clarity to ESG investing.
Connect with us
Download Fact Sheet
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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.
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
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
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.
EXAMPLE: HUMAN CAPITAL CRITERIA
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
Get the Brief
Get the Brief
To explore the Northern Trust ESG Vector Score in-depth, download the detailed report.
Dive deeper into how it works
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 Media
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 focsed 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.
Vector (vec•tor | vekter) = a quantity that has both magnitude and direction.
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.
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About Northern Trust
Asset Management
About Northern Trust
Asset Management
Key Benefits
Key Benefits
Comprehensive Framework
Comprehensive Framework
The Methodology
The Methodology
About ESG Vector Score
About ESG Vector Score
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About Northern Trust Asset Management
About Northern Trust Asset Management
Key Benefits
Key Benefits
Comprehensive Framework
Comprehensive Framework
The Methodology
The Methodology
About ESG Vector Score
About ESG Vector Score
TM
THE NORTHERN TRUST ESG VECTOR SCORE
Insights & Research
About
What We Do
Who We Serve
Insights & Research
About
What We Do
Who We Serve
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About Northern Trust
Asset Management
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About ESG Vector Score
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