Stewardship Governance and Resources at Northern Trust

Aug 2, 2022 1:00 PM ET
Article

Governance to Strengthen Accountability

The governance across our business strengthens accountability to clients, shareholders and other stakeholders, while empowering stewardship led by the principles of sustainability.

Our Investment Governance Committee, which reports to the Executive Committee and sets investment policies, delegates responsibility for stewardship to its Proxy Committee. The Proxy Committee evaluates the effectiveness and robustness of our stewardship policies, initiatives, engagements with companies, and proxy voting. It also ensures the effectiveness of vendors we use to augment our stewardship program and investigates conflicts of interest that may arise from our stewardship activities.

Composed of senior representatives representing the firm’s diverse business functions — and, in turn, the breadth of our clients’ needs — the committee members include equity and bond research analysts, portfolio managers, and ESG and sustainable investing specialists. Additionally, risk professionals from EMEA and the U.S. sit on the committee, providing critical insight into regional issues and regulations governing stewardship and sustainable investing. Our executive vice president for corporate sustainability, inclusion and social impact provides guidance on corporate values, while our client relationship managers on the committee represent the diversity of regions and client types (individual and institutional).

To ensure that we align our stewardship program with our sustainable investing principles, the NTAM Proxy Committee solicits guidance from our Sustainable Investment Council (SIC). The SIC, which reports directly to the Executive Committee, sets sustainable investing standards and drives strategic growth in our sustainable investing business through product innovation, expansion of our investment capabilities, and employee education. The SIC, chaired by the global head of sustainable investing and stewardship, serves as a central “hub” of knowledge on ESG initiatives across all of Northern Trust, and drives alignment and coordination of ESG and sustainable investment activities. It leverages a broad range of expertise across regions and business groups, with a makeup similar to the Proxy Committee, including experts in investment research, portfolio management, corporate responsibility, risk, compliance and sales. In coordination with the Proxy Committee, the SIC oversees the relationship with our external engagement vendor EOS, and our relationships with any signatories and coalitions.

Our Team: Building on a Legacy of Deep ESG Experience and Expertise

We consistently seek ways to build on our 30-year legacy of creating long-term investment value for our clients through purposeful management of ESG risks, effective engagement and proxy voting that aligns with our clients’ values.

To this end, in May 2021 we merged the sustainable investment and stewardship teams with the hiring of Julie Moret in the newly created role of global head of sustainable investing and stewardship. Julie oversees our sustainable investing and stewardship policies, fosters research and product development, advances portfolio integration of ESG across asset classes and contributes our sustainable investing and stewardship perspectives to external industry associations. Additionally, she advises NTAM’s president and executive group on sustainable investing and stewardship best practices.

Our team of 15 specialists serves as a center of excellence for the business, promoting best practices in ESG integration and stewardship. Further, we leverage a wide network of 32 other employees with expertise in client servicing, distribution, portfolio management, research and strategy, among other skills, who dedicate on average 30% or more of their time to sustainable investing. The team provides analysis and insights on emerging ESG themes and monitors critical issues, industry trends and regulatory developments. It translates how these impact our clients, the firm and our investments. The team also helps design ESG strategies.

We structured the new team into three specializations: ESG research and integration, stewardship and client engagement. Demonstrating the benefits of combining the stewardship and sustainable investment teams, the specialists collaborate to embed ESG practices into our investment process and stewardship efforts, and support dialogue with clients about sustainable investing. We describe these specializations in more detail on the next page.

Areas of specialization

ESG research and integration specialists

  • Partner with our investment team to plan and implement ESG integration appropriate for various asset classes, investment strategies and time horizons.
  • Develop research insights and proprietary data tools, such as the ESG Vector Score.
  • Keep abreast of developments related to ESG data tools and technology to improve the ESG investment process and gain research insights.

Stewardship specialists

  • Engage with companies to improve their policies and strategies related to ESG.
  • Ensure that proxy voting aligns with our policies.
  • Manage and participate in engagement campaigns in collaboration with other shareholders.

Client engagement

  • Consult with clients to understand their sustainable investment objectives and advise them about solutions that may help them achieve those objectives, both financially and in ways that align with their values.
  • Partner with the ESG research and integration specialists to develop innovative sustainable investing solutions, based on input from clients.
  • Provide education programs for employees and clients.

Our Diverse Sustainable Investing and Stewardship Team

We are committed to diversity, equity and inclusion in our business because we believe perspectives based on a variety of backgrounds lead to better outcomes for our clients, shareholders and communities. Our sustainable investing and stewardship team, which is 58% female, is spread across regions, with 47% in the U.S., 27% in Europe and 27% in India. They have an average of 15 years of professional experience, and 71% of our team members hold a master’s degree in disciplines including business administration, commerce, conflict resolution, public policy and international economics.

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