Northern Trust launches emerging markets ESG screened fund in collaboration with MSCI

Northern Trust, the US-based asset management and custody giant, has launched a fund based on a new custom MSCI emerging markets index integrating Environmental, Social and Governance (ESG) screens.

The pooled, passively managed offering has been launched in collaboration with MSCI ESG Research and its fellow MSCI arm, Institutional Shareholder Services (ISS) (link to announcement).

The MSCI Emerging Markets Custom ESG Index and the corresponding fund aim to let institutional investors get exposure to emerging markets, while incorporating environmental and social screening, as well as a “unique” governance screen.

There is a four-stage screening process. Three screens are applied to the MSCI emerging markets index universe and this is followed by checks on governance and executive independence.Chicago-based Northern Trust, with $4.8trn (€3.7trn) and $758.9bn under custody and management respectively, says it is seeing increasing demand for exposure to emerging markets from its institutional investor clients.

“This index is unique in combining industry screens, norms-based screens and governance screens,” said Thomas Kuh, executive director at MSCI ESG Indices.

Northern Trust reckons there are three drivers behind the growth of ESG: internal governance at asset owners, the broader regulatory environment, and the growing recognition of the importance of ESG as an investment theme.

Northern Trust, which already manages more than $20bn in socially screened assets for clients, announced late last year that it had launched the World Custom ESG Equity Index Fund.