Northern Trust unveils EM green transition strategy

Northern Trust Asset Management has launched a sustainable emerging market green transition index strategy, with climate change considerations as a cornerstone.

The strategy will combine Northern Trust’s proprietary ESG exclusion approach with screens to minimise climate-related risks and include positive tilts to maximise opportunities to benefit from the transition to a low carbon economy.

Screens applied include fossil fuel exclusions and energy screens to minimise current and potential exposure to carbon emissions and any other associated risks. Positive tilts are then applied to companies with green revenues and a strong climate strategy by using the MSCI Transition Risk Management Score.

It will use the MSCI World Index and the MSCI Emerging Markets Index as its parent indices, offering investors climate-aware exposure to the MSCI ACWI universe via custom indices designed by Northern Trust Asset Management and managed by MSCI.

Marie Dzanis, head of Northern Trust Asset Management in Europe, Middle East and Africa, said: “The strength and uniqueness of this strategy is in how it incorporates the opportunities of climate change alongside the hedging of risks, thereby increasing exposure to companies with either green revenues (such as alternative energy or energy efficiency) or a strong long-term climate policy and robust carbon reduction targets.”