Northern Trust is set to provide pension funds and other global institutional investors with heightened insights and transparency over environmental, social and governance (ESG) risk exposures.
The ESG Analytics Summary, which will be prepared by Northern Trust’s investment risk and analytical services group, will provide investors with periodic snapshot analysis across their equity and corporate bond portfolios.
The analysis will enable investors to track changes in a fund’s ESG profile over time, compare results on an absolute and relative basis, and compare asset managers’ scores against each other.
The bank said that the insights are generated by combining its global custody asset information with data provided in partnership with information services provider IdealRatings.
This comes at a time when ESG rules play a “heightened role in global investor considerations, with institutions increasingly seeking to integrate sustainability factors into their portfolios”, according to Serge Boccassini, product lead, investment accounting and analytic solutions at Northern Trust.
In order to achieve this effectively, Boccassini noted that it is “vital” to understand the investment risks.
As an example, the bank said that it can provide evidence of an institutions’ ESG scores and exposures and support adherence to regulatory requirements and global standards.
Additionally, it can be used to facilitate discussions with their investment managers and manage potential stakeholder concerns and reputational risk, Northern Trust said.
Meanwhile, ESG analytics can also supplement traditional investment analytics by providing a more “holistic view of investment risks, exposures and opportunities”.
Northern Trust noted that during volatile market conditions, understanding the strength of a company’s governance structures and processes can give investors a timely and more complete picture of its resiliency.
Mohamed Donia, CEO of IdealRatings, commented: “We are delighted to partner with Northern Trust to provide insights into global investors’ portfolio exposures. The ESG Analytics Summary provides enhanced transparency to help investors avoid companies that pose a greater financial risk due to their ESG practices – as well as satisfy regulatory requirements and meet global standards.”
Boccassini added: “Our analysis provides insights into clients’ ESG exposures to help them identify financial risks and opportunities – and help ensure their investments continue to be aligned with their values.”
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