Environmental, Social and Governance Investing

Transcription

1 NORTHERN TRUST ASSET MANAGEMENT Environmental, Social and Governance Investing Avantika Saisekar ESG Product Specialist 1

2 NORTHERN TRUST RESPONSIBLE INVESTING OVERVIEW WHO WE ARE AUM PROFILE $65B INNOVATIVE ESG MANAGER 25+ YEARS OF EXPERIENCE 15 CLIENT COUNTRIES Americas 16% EMEA 58% APAC 26% AUM $65 BILLION AUA $20 BILLION 122 SMA s As of December 2016 ACCOLADES MARKET OUTREACH Best Private Bank SRI/Social by Euromoney* Hold 3 of the top 10 Largest Equity funds in the world** United Nations Principles of Responsible Investing Sustainable Accounting Standards Board Banking Environmental Initiative As of June 30, 2017 *See disclosures for more information **evestment March

3 DEFINING YOUR ESG FOCUS Responsible Investing ESG Investing Ethics Environment Social Governance Faith based investing Sustainable resources Clean technology Climate change Controversial weapons Repressive regimes Health Safety Board independence Majority ownership Financial planning & reporting Adult entertainment Landmines Gambling Tobacco Low carbon Product Safety Executive pay Alcohol Labor Relations Diversity northerntrust.com 2017 Northern Trust 3

4 DRIVERS OF ESG IN THE US Increased market demand and regulation combined with market factors are leading to an increase in ESG assets. Market Demand Regulation Market Factors Growth of ESG Assets Millennials Women Students Endowments Current Administration Policy Reform Risk Mitigation Performance ESG Analytics northerntrust.com 2017 Northern Trust 4

5 GLOBAL ESG TRENDS Size and growth vary tremendously across region. - - $12.04Tr - - Negative & Norms-based screening - - Impact investing fastest growing segment - - $8.7Tr - - Up 33% from ESG Integration is dominant ($5.8tr) - - Canada reached $1tr (ESG integration) - Integration is the biggest strategy in Australia/New Zealand and Asia - Focus on corporate governance in HK, Taiwan and Japan - ESG Integration & Engagement Global ESG assets have grown by 25% from 2014 to 2016 from $21.4 trillion to $22.9 trillion* From 2014 to 2016 fastest growing market has been the Japan followed by Australia/New Zealand and Canada. Fifty-three percent of total professionally managed assets in Europe now use responsible investment strategies *GSIR report 2017 northerntrust.com 2017 Northern Trust 5

6 ESG as an Investment Solution northerntrust.com Northern Trust

7 Uniquely Defined ESG Principles Values Performance 7

8 HOW TO IMPLEMENT THIS? Determine Values Assess Portfolio Risk Establish Goals Implement What would you like your client to achieve? What is the greatest ESG risk in your client s portfolio? Performance goals & time horizon Strategy selection and implementation 8

9 Can you generate return while keeping your investments sustainable? northerntrust.com 2016 Northern Trust 9

10 BROAD ESG INDEX PERFORMANCE Highlighted areas represent outperformance of ESG index providers Index 1 Year 3 Year 5 Year MSCI WORLD ESG 13.84% 5.67% 9.82% MSCI WORLD SRI 14.47% 5.88% 9.48% MSCI WORLD 15.43% 6.12% 9.99% FTSE4GOOD GLOBAL 15.38% 5.73% 10.03% FTSE4GOOD GLOBAL % 5.51% 9.44% FTSE DEVELOPED 15.62% 6.11% 9.93% DOW JONES SUSTAINABILITY WORLD INDEX 17.79% 3.14% 7.47% DOW JONES WORLD INDEX 15.56% 5.42% 8.79% MSCI EUROPE ESG 7.74% (0.28%) 6.85% MSCI EUROPE SRI 6.33% 0.49% 7.81% MSCI EUROPE 10.47% (0.95%) 6.25% DOW JONES SUSTAINABILITY EUROPE INDEX 12.07% (0.92%) 6.18% DOW JONES EUROPE INDEX 9.74% (1.26%) 5.76% MSCI PACIFIC ESG 16.17% 5.48% 7.13% MSCI PACIFIC SRI 15.95% 6.15% 7.09% MSCI PACIFIC 16.07% 4.87% 6.53% DOW JONES SUSTAINABILITY ASIA PACIFIC INDEX 13.41% 0.02% 2.52% DOW JONES ASIA PACIFIC INDEX 16.61% 5.10% 5.96% MSCI NORTH AMERICA ESG 15.47% 8.16% 11.67% MSCI NORTH AMERICA SRI 17.78% 8.42% 10.91% MSCI NORTH AMERICA 17.34% 9.49% 12.40% DOW JONES NORTH AMERICA SUSTAINABILITY INDEX 18.73% 8.78% 11.20% DOW JONES AMERICAS INDEX 17.68% 8.65% 11.41% Source: Northern Trust, Index Providers (As of 3/31/2017 ) Past performance is no guarantee of future results. Index performance returns do not reflect any management fees, transaction costs or expenses. It is not possible to invest directly in any index northerntrust.com 2016 Northern Trust 10

11 ESG INVESTMENT STRATEGIES ESG can be implemented using the strategies below: Sophistication of ESG strategy Negative Screening Norm Based Best in class ESG Integration Thematic investing Impact Investing Exclusion of stocks in specific industries or geographic areas Exclusions based on standards such as the UN Global Compact Strategies which overweight companies that are leaders in implementing ESG Incorporating ESG considerations across business activities and investments Investing in the broad ESG themes example: low carbon, green energy, clean technologies, water services Investing in specific projects that are expected to meet a social or environmental goal Proxy Voting and Engagement *The Best in class terminology refers to a specific type of strategy incorporating ESG into the investment process 11

12 BEST IN CLASS INDICES- MSCI EMERGING MARKETS (EM) ESG LEADERS INDEX A capitalization weighted index that provides exposure to companies with high Environmental, Social and Governance (ESG) performance relative to their sector peers. The Index is designed for investors seeking a broad, diversified sustainability benchmark with relatively low tracking error to the underlying equity market. *The Best in class terminology refers to a specific type of strategy incorporating ESG into the investment process **Source: MSCI 12

13 Questions? 13

14 Avantika Saisekar, Product Specialist ESG Investing, Northern Trust Asset Management Avantika Saisekar is a Product Specialist on the Environmental, Social, Governance (ESG) team within Northern Trust Asset Management. Avantika supports ESG innovation and product development across Northern Trust s array of asset class capabilities specifically in the global institutional market. Avantika has received formal training from the United States Forum for Sustainable and Responsible Investment (USSIF) on Sustainable Investing and is CFA ESG-100 certified. Avantika was recently added to the UNPRI Assurance Group focused on transparency, and for advancing accountability in the PRI standards as364@ntrs.com Avantika was a part of the 2013 GOLD Program- Investments Track. During her time in the Rotational Development Program, Avantika completed rotations within the Global Equity Strategy, Wealth Management Investment Product, Fixed Income Research, Investment Strategy, Equity Research, and ESG teams. Prior to joining the Rotational Development Program, Avantika earned a B.A. in Economics from Claremont McKenna College located in Claremont, California. 14

15 IMPORTANT INFORMATION World s Most Ethical Companies Honorees are chosen by Ethisphere s network of leaders and the World s Most Ethical Companies Methodology Advisory Panel. Ethispehere s proprietary rating system is comprised of a series of questions based on the EQ Framework focusing on a comprehensive sampling of a company s corporate governance, risk, sustainability, social responsibility, compliance or ethics. One of the World s Most Admired Companies Fortune s survey partners at Hay Group starts with approximately 1,500 companies: the Fortune 1, the 1,000 largest U.S. companies ranked by revenue; non-u.s. companies in Fortune s Global 500 database with revenues of $10 billion or more. Hay then selects the 15 largest for each international industry and the 10 largest for each U.S. industry, surveying a total of 652 companies from 30 countries. To create the 54 industry lists, Hay polled executives, directors and analysts to rate companies in their own industry on nine criteria, from investment value to social responsibility. A company s score must rank in the top half of its industry survey to be listed. This material is provided for informational purposes only. All material has been obtained from sources believed to be reliable, but the accuracy, completeness and interpretation cannot be guaranteed. Information contained herein is current as of the date appearing in this material only and is subject to change without notice. Indices and trademarks are the property of their respective owners. All rights reserved Northern Trust Corporation Head Office: 50 South La Salle Street, Chicago, Illinois U.S.A. Incorporated with limited liability in the U.S. 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/disclosures). Northern Trust Asset Management comprises Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc. and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company. In Singapore, Northern Trust Global Investments Limited (NTGIL) and Northern Trust Investments, Inc. are exempt from the requirement to hold a Financial Adviser s License under the Financial Advisers Act and a Capital Markets Services License under the Securities and Futures Act with respect to the provision of financial services. In Australia, NTGIL is exempt from the requirement to hold an Australian Financial Services License under the Corporations Act 2001 in respect to the provision of financial services. NTGIL is regulated by the FCA under U.K. laws, which differ from Australian Laws Best North America SRI/Social Impact Investing Private Bank The Annual Private Banking and Wealth Management Survey provides a qualitative review of the best services in Private Banking, by region and by areas of service. Full-results.html 15

16 DISCLOSURES IMPORTANT INFORMATION. The information contained herein is intended for use with current or prospective clients of Northern Trust Investments, Inc. 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. All securities investing and trading activities risk the loss of capital. Each portfolio is subject to substantial risks including market risks, strategy risks, adviser 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 Northern Trust s efforts to monitor and manage risk but does not imply low risk. Past performance is no guarantee of future results. Performance returns and the principal value of an investment will fluctuate. Performance returns contained herein are subject to revision by Northern Trust. 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 advisory fees, transaction costs or expenses. It is not possible to invest directly in any index. Performance returns are reduced by investment management fees and other expenses relating to the management of the account. 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. Gross performance returns do not reflect the deduction of investment advisory fees and returns will therefore be reduced by these and any other expenses occurred in the management of the account. For additional information on fees, please refer to Part 2a of the Form ADV or consult a Northern Trust representative. 16

17 DISCLOSURES Forward-looking statements and assumptions are Northern Trust 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. If presented, hypothetical portfolio information provided does not represent results of an actual investment portfolio but reflects representative historical performance of the strategies, funds or accounts listed herein, which were selected with the benefit of hindsight. Hypothetical performance results do not reflect actual trading. No representation is being made that any portfolio will achieve a performance record similar to that shown. A hypothetical investment does not necessarily take into account the fees, risks, economic or market factors/conditions an investor might experience in actual trading. Hypothetical results may have under- or over- compensation for the impact, if any, of certain market factors such as lack of liquidity, economic or market factors/conditions. The investment returns of other clients may differ materially from the portfolio portrayed. There are numerous other factors related to the markets in general or to the implementation of any specific program that cannot be fully accounted for in the preparation of hypothetical performance results. The information is confidential and may not be duplicated in any form or disseminated without the prior consent of Northern Trust. This information is intended for purposes of Northern Trust marketing of itself as a provider of the products and services described herein and not to provide any investment recommendations or advice within the meaning of the Department of Labor s Final Fiduciary Rule (29 CFR ). Northern Trust is not undertaking to provide impartial investment advice or give advice in a fiduciary capacity to the recipient of these materials. To the extent that the recipient of these materials has authority to act on behalf of a benefit plan that is subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ( ERISA ), Northern Trust provides information with the understanding that the recipient: (1) is a fiduciary under ERISA with respect to any plan transaction(s) contemplated herein and is responsible for exercising independent judgment in evaluating any such transaction(s); (2) is independent of Northern Trust; (3) is a bank or similarly regulated financial institution, insurance carrier, registered investment adviser, registered broker-dealer, or a plan fiduciary that holds, or has under management or control, total assets of at least $50 million; (4) is capable of evaluating investment risks independently, both in general and with regard to particular transactions and investment strategies. Please advise Northern Trust immediately if any of the foregoing understandings is incorrect. Further, Northern Trust and its affiliates receive fees and other compensation in connection with the products and services described herein as well as for custody, fund administration, transfer agent, investment operations outsourcing and other services rendered to various proprietary and third party investment products and firms that may be the subject of or become associated with the services described herein. Northern Trust Asset Management is composed of Northern Trust Investments, Inc. Northern Trust Global Investments Limited, Northern Trust Global Investments Japan, K.K, NT Global Advisors Inc., 50 South Capital Advisors, LLC and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois U.S.A. 17

18 18