Stockholm (NordSIP) – With a thirty-year commitment to social, environmental, and financial integrity, Northern Trust Asset Management (NTAM) has developed considerable expertise in sustainable investments. To build on this rich legacy, in May 2021, the firm appointed a veritable expert in the field, Julie Moret, as global head of Sustainable Investing and Stewardship. Recently, NordSIP had the opportunity to interview Moret and hear more about how a quantitative manager such as NTAM can influence the companies it invests in, the challenges of working on both sides of the Atlantic, and her take on sustainability issues close to her heart.
“My fundamental belief is that sustainability and financial issues are not mutually exclusive and are deeply connected,” shares Moret. “We are living in an increasingly changing world experiencing profound environmental and social headwinds. Whilst these are E and S issues, they fundamentally represent economic drivers of change which make them relevant to understand from a risk-and-return lens. Taking this lens of ESG as pre-financial indicators is deeply ingrained at NTAM, so I feel there is a strong affinity between my personal and professional spheres,” she adds.
ESG, the quant way
As a USD 1.3 trillion global asset manager with more than USD 155 billion managed in dedicated sustainable investment strategies, NTAM is keenly aware of the role they have to play in driving ESG innovation and industry development. The asset manager has found different ways to work with sustainability systematically, matching the firm’s quantitative investment style.
“There are three levers we switch on in our toolbox,” explains Moret. “Firstly, purposeful engagement through our active participation in several collaborative industry initiatives such as CA100+ where we co-lead several direct company engagements. Secondly, re-enforcing our voice through proxy voting. We’re proud to have been cited by ShareAction in their recent report as the best performing US asset manager in support of E&S resolutions, though we also recognise there is more work to be done. Thirdly, the development of NTAM’s ESG Vector Score in 2021- an industry-first approach combining the Sustainability Accounting Standards Board’s (SASB) standards, which are industry-specific financial materiality standards, and the thematic structure of the Task Force on Climate-related Financial Disclosures (TCFD),” she says.
According to Moret, NTAM’s vector score provides an additional lens to differentiate between leaders and laggards on how companies are performing managing material ESG issues. It also serves as a signal to target the engagement with companies for continued improvement in ESG standards.
Sustainability on both sides of the Atlantic
Having a global sustainability role in Europe for a US-headquartered firm, Moret must navigate the different regulatory frameworks, priorities and definitions in both regions and beyond. She is up to the challenge. According to her, investing ultimately serves to safeguard the assets that clients have entrusted with NTAM, no matter where they are located. “When it comes to sustainable investing, all regions are at different stages of maturity and moving at different paces with ESG adoption,” reflects Moret. “The US, relative to Europe, is at an earlier stage on that evolution. The key takeaway, though, is that globally we are seeing sustained demand from end investors for sustainable investing and an accelerated focus on ESG from policymakers and regulators,” she adds.
So, what exactly is different about sustainability trends on both sides of the Atlantic? “I would say an important distinction to understand between the US and Europe is on climate, which has a higher propensity to take on a more politicised lens in the US than in Europe,” says Moret. “Given the social events that occurred in the US over the last couple of years, human capital, or ‘S’ issues are an acute area of focus in the US. However, I would be quick to add that globally we are seeing a broad coalescing on four common priorities – Climate, human capital- diversity, equity and inclusion (DE&I), disclosure and regulation,” she points out.
Priorities and trends
Moret takes the example of one of these themes, DE&I, to illustrate how recognising its strategic priority is not just a matter of promoting the correct values among the firm’s investee companies but also internally. “Our global and regional executive committees are 50% gender and ethnically diverse, underscoring our organisations’ commitment to these issues as a long-term driver of success,” she explains, adding that this line of thinking extends into stewardship activity.
Briefly discussing the rationale behind fostering diversity, equity and inclusion, Moret mentions the scientific ground. “Ensuring a culture of inclusion in the workforce has been proven to result in better overall performance for companies. As an industry, we need to set measurable goals and benchmarks and report on them. Whilst progress is being made, we have more to do as an industry, and at NTAM, we strive to continually do better,” she says.
Moret firmly believes that the drive towards transparent, consistent, comparable and measurable ESG disclosure standards will not abate soon. According to her, the recent formation of the International Sustainability Standards Board (ISSB) is pivotal to driving towards much needed global standards.
Regulation, the fourth of NTAM’s priority areas, is also moving forward fast. From the point of view of a European investor focused on the deluge of legislation from the EU and the UK, it is interesting to hear that things are moving fast on the other side of the Atlantic. “We are encouraged by the shift in US policy signals and proposed rulemaking from the Department of Labour (DOL),” comments Moret, shedding some light on the developments in the US. “We believe these changes will be supportive of wider adoption of sustainable investing and evolving ESG practices through a materiality financial-based lens. Our view is that we will continue to see both fluidity and continued acceleration in the US on matters of ESG regulation which all investors should pay attention to,” she advises.
Almost a year into her strategic sustainability role at NTAM, Moret has had time to truly appreciate the firm’s deep heritage as a trusted leader in sustainability. What stands out, in her opinion, is the unique combination of ESG along with stewardship and the connectivity with client engagement. “The NTAM way of working with sustainability underscores the organisational importance of embedding ESG holistically into the investment process, stewardship and client dialogue,” concludes Moret.
