Northern Trust Asset Management offers ESG fixed income strategies

Northern Trust Asset Management has continued to expand its sustainability strategies, with two new offerings combining fixed income and sustainable investing.

The Global High Yield ESG Bond Index Strategy and Euro Investment Grade Corporate ESG Bond Index Strategy aim to integrate sustainability considerations in order to potentially mitigate both financial and non-financial risks – and improve risk-adjusted returns as well as the overall ESG profiles.

These strategies are designed to provide investors their desired yield exposure while improving their ESG score within a risk-controlled framework. This is achieved through a combination of negative screening to remove certain companies that may have poor ESG considerations, such as violators of the UN Global Compact or companies with controversial lines of business. Northern Trust Asset Management then applies its best-in-class in-house optimisation process. This results in improved ESG profiles, desired benchmark risk controls and yield targets.

“Although investors have been implementing equity-based ESG strategies for many years, many asset owners had been constrained by the lack of ESG investment options available in the fixed income market,” says Marie Dzanis, head of Northern Trust Asset Management, Europe, Middle East and Africa. “At Northern Trust Asset Management, we continue to innovate and pioneer ESG and sustainable strategies and analytics to meet investors’ evolving needs. We are committed to designing solutions that complement passive and active investments, mitigate risks and help investors capture new opportunities.”

“By offering these strategies at the intersection of fixed income and sustainability, we are helping investors reach their investment goals,” says Valeria Dinershteyn, sustainable investment strategist at Northern Trust Asset Management.

“These strategies employ a propriety ESG optimisation to enhance the portfolio’s ESG rating relative to the index. In fact, during recent market turbulence, we’ve had an opportunity to watch our investment thesis play out. We found higher-rated ESG companies did, indeed, have tighter spreads in the fixed income markets. This underscores our belief that higher-rated ESG issuers can, additionally, offer downside mitigation during market uncertainty."

Entrusted with US$914 billion of investor assets, Northern Trust Asset Management is among the world’s largest investment managers. The firm helps investors navigate changing market environments so they can confidently realise their long-term objectives. It has more than 30 years of sustainable investing expertise and innovation, is a UNPRI signatory and manages four of the top 10 largest ESG index funds globally (eVestment data as of 31 December, 2019).