Morten Olsen, Global Fixed Income Head of Business Strategy, Northern Trust Asset Management
Can you give a brief overview of your strategy in terms of what you are trying to achieve for investors.
The NT Global Bond ESG Climate Index solutions provide a distinct opportunity to invest sustainably in fixed income both in corporate and government bonds. Available in 1-5y duration and a standard approx. 7.5y duration, this passive strategy provides exposure to government, government-related, corporate and securitised bonds and tracks the custom indices within the Solactive Global Bond ESG Climate Index range, in alignment with a global aggregate bond portfolio.
What is your investment process?
Within government bonds, our ESG & Climate framework combines fiscal strength, governance, and carbon metrics. Good governance and fiscal prudence complement traditional credit evaluation, and a carbon reduction target is added to hedge climate change risks. ‘Fiscal Strength' reflects whether a country has sufficient financial capital to manage ESG risks. ‘Governance' captures a country's capacity to address environmental and social risks through its financial, judicial, and political systems. The carbon emissions & intensity reduction target, with a carbon trend score for the improvement over the past three years, provides the climate metric of the framework.
Within corporate bonds, we apply our NT Custom ESG exclusions removing the worst violators of the U.N. Global Compact, weapons, the tobacco value chain, thermal coal miners & coal fired generators, for profit prisons. We then target a reduction in carbon intensity and an uplift in carbon risk rating.
What is the make-up of the investment team?
Fixed income is a key expertise for Northern Trust Asset Management representing more than $400billion in asset under management (as of September 30th 2022). Our fixed income investment team consists of 67 professionals with an average of 19 years of industry experience. Overall responsibility lies with Thomas Swaney, Chief Investment Officer of Global Fixed Income, who reports to Angelo Manioudakis, CFA, Chief Investment Officer at Northern Trust Asset Management.
Mike Chico is lead portfolio manager for the NT Global Bond ESG Climate Index strategies and is responsible for daily portfolio oversight and activity, ensuring proper weighting of major sectors and overall characteristics and risk. Mike is supported by our team of sector specialist portfolio managers in charge of trading in assigned sectors, enabling better information on liquidity / transaction costs, and facilitating portfolio construction and sampling decisions.
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