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FlexShares: finding the right climate for ETFs

In March 2021, Northern Trust Asset Management launched its first ETFs in Europe under its established FlexShares brand. The two funds, both of which have a climate focus, reflect the Chicago-based asset manager's 30 years of managing sustainability-focused investment strategies.

"There was a compelling case to launch ETFs in Europe at this time," says Marie Dzanis, Head of EMEA, Northern Trust Asset Management. "We saw there was tremendous growth in the ETF market in the UK and Europe - and this is a region which is very much ahead in sustainable investing. There is a lot of opportunity here."

Marie Dzanis
Head of EMEA, Northern Trust Asset Management

The launch was the result of a multi-year process, she says. FlexShares prepared the ground carefully, conducting extensive market assessment and discussions with clients and partners in the ecosystem. "An investment manager needs to be truly additive to the market," says Dzanis.

She describes the two ETFs as “actively designed with the transparency of indexing, built specifically to fit within professional investors’ evolving needs to help manage portfolio volatility and target income in a low yield environment while doing so with a focus on quality.”

Both ETFs focus on developed markets and use Northern Trust’s longstanding proprietary quality score. This means that they are not simply looking at companies currently reducing their emissions but also those which making the transition to a greener future.

In the UK and Europe, she observes, investors recognise that "ESG sustainable investment principles are table stakes" and will take "a forward-looking viewpoint on climate risk." That is very much aligned with Northern Trust's "foundational" approach to climate risk which "has been in our capital markets assumptions for years."

Listing in London was a natural step.

"London Stock Exchange is one of the leading ETF trading venues in Europe with more than 1,700 ETPs. It has a global presence - we have clients from the Middle East and Asia Pacific regions who trade ETFs in London. As Northern Trust is a global asset manager, this was an important factor."

She says that she has been "pleasantly surprised" by the co-operative and welcoming nature of the market in London. "There's a strong ecosystem here with many specialists and it pays to lean in and engage with it."

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