Northern Trust Asset Management Introduces ESG Vector Score

Northern Trust Asset Management (NTAM) introduced today the Northern Trust ESG Vector Score^TM, 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. It can be used in constructing and managing investment portfolios and stewardship activities.

The ESG Vector Score focuses on the magnitude and direction of key ESG related business issues likely to have a financial impact on companies and hence a portfolio’s performance. It provides a consistent, transparent methodology to gain greater clarity when building and managing sustainable portfolios.

“The Score aligns with the firm’s philosophy that investors should be compensated for the risks they take – in all market environments and any investment strategy. We consider this an essential tool to measure how a company is managing its ESG business risks,” NTAM president Shundrawn Thomas said.

NTAM’s industry-first approach marries two leading sustainability disclosure standards and 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. The design 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.

As demand for ESG-driven 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. Concerned by the numerous ESG methodologies and data sets available, 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.