Stockholm (NordSIP) – This week Northern Trust Asset Management’s FlexShares Exchange Traded Funds announced the launch of two climate-focused ETFs: the FlexShares® Developed Markets Low Volatility Climate ESG UCITS ETF (QVFD) and the FlexShares® Developed Market High Dividend Climate ESG UCITS ETF (QDFD). The funds are listed on both the London Stock Exchange and Euronext. They are available to investors in the UK, Ireland, Sweden, Germany and the Netherlands. This is the first time that FlexShares’ ETFs are available in Europe
“We’re pleased to present the first FlexShares products in Europe, which reflect Northern Trust Asset Management’s three decades of experience in managing sustainability-focused investment strategies,” says Marie Dzanis (Pictured), head of Europe, Middle East and Africa (EMEA) at Northern Trust Asset Management. “Actively designed with the transparency of indexing, these two ETFs are built specifically to fit within EMEA investors’ evolving needs to help manage portfolio volatility and deliver income in a low yield environment while doing so with a focus on quality,” she adds.
The New ETFs
Both strategies apply Northern Trust Asset Management’s proprietary Quality factor to identify profitable, well-managed companies that exhibit strong cash flows and maximise portfolio exposure to ESG while reducing their carbon footprint. FlexShares partnered with STOXX to develop benchmarks for both ETFs.
QVFD invests in stocks that exhibit lower overall absolute volatility cash flow, combined with quality and ESG to maximize quality, improve ESG ratings and create minimum variance. It tracks the iSTOXX® Northern Trust Developed Markets Low Volatility Climate ESG Index.
QDFD focuses on stocks with high income-generating potential that integrate sustainability concerns to improve ESG ratings and enhance dividend yield. It tracks the iSTOXX® Northern Trust Developed Markets High Dividend Climate ESG Index.
“As a global asset manager, we are pleased to extend our deep principle-based culture and collaborative approach with leading market expertise to complement our existing strategies in the European marketplaces,” adds Darek Wojnar (Pictured), Global Head of Funds, ETFs & Managed Accounts at Northern Trust Asset Management.
Northern Trust AM and the Nordics
“These new ETFs have been developed specifically to meet the needs of professional investors and intermediaries, delivering sustainability-focused outcomes,” Dzanis tells NordSIP. “Expanding our product set to Sweden is part of our continuing strategy for the growth of our business and complement our existing strategies with our Nordic clients. We’ve been managing low volatility and high dividend strategies for years globally, and with discerning institutional Swedish investors.
“Northern Trust Asset Management has more than 30 years of experience in sustainable investing, and we continue to see a growing demand for our sustainability strategies,” Dzanis explains. “We are celebrating 10 years present in Sweden and are the 5th largest manager of pension assets and the 10th largest institutional manager in the Nordics. We are proud to serve our longstanding relationships in the region and look forward to further contributing to the Swedish ESG stock market with innovative products. Sweden has long demonstrated sophistication on sustainable investment strategies.”
“We understand the demands for transparency and liquidity, in response to regulatory changes and desire for better investment outcomes. Additionally, the climate change focus makes these ETFs distinct offerings in the region. We believe it’s perfect timing to launch a physical ETF that is transparent,” she adds.
The FlexShares ESG ETF Approach
“FlexShares has been leveraging Northern Trust Asset Management’s investment capabilities since our initial US launch in 2011,” Wojnar tells NordSIP. “This family of ETFs has a holistic sustainability integration model when it comes to ESG that includes sustainability score, climate change, ESG controversies, and business involvement screening. ”
According to Wojnar, FlexShares ESG ETFs use a sustainability score to invest in companies that acknowledge and manage financially material ESG issues better than peers, including climate change, employee health and safety, and board independence. The funds also explicitly manage the carbon footprint and position the portfolio to mitigate risks and capitalize on the opportunities arising from the transition to a low carbon economy. These ETFs also apply exclusions to companies involved in ESG controversies and that derive significant revenues from tobacco products, civilian firearms, thermal coal power generation and extraction and business connections to controversial weapons.
“We are proud to meet investors wherever they are on the spectrum of ESG investing. Our philosophy is that investors should be compensated for the risks they take in all market environments, and we build products that are designed to quantify this risk and deliver unique insights not already priced in the market,” says Dzanis.
“As we look to the future, our product design will be based on investor appetite and how we can help solve challenges for our clients; help them generate alpha, manage volatility and support ESG objectives,” Wojnar concludes.