FlexShares Exchange Traded Funds has launched a new ESG ETF focused on climate with exposure to emerging markets. This is an area with limited product offerings to date.
The FlexShares ESG & Climate Emerging Markets Core Index Fund (FEEM ), listed on the NYSE on April 21, is the newest addition to FlexShares’ existing climate suite introduced last September, which currently includes U.S. large cap equities, developed markets ex-U.S. equities, and two fixed-income ETFs.
“The addition of the FlexShares ESG & Climate Emerging Markets Core Index Fund will complement FlexShares’ existing climate funds, providing investors a diverse set of core sustainability products they can use for exposure across the globe,” Crystal McClenthen, Head of Product Strategy, Funds and Managed Accounts at NTAM, says in a statement.
FEEM aligns with the broader suite’s strategy, which seeks to help investors improve their portfolio’s overall ESG score and reduce carbon risk while maintaining core equity exposure, according to a statement from the firm.
The full climate suite utilizes the Northern Trust ESG Vector Score, which is designed to rank companies based on their management of and exposure to material ESG metrics and to align with the SASB Standards, as well as a carbon risk rating to hedge ESG-related risks and capitalize on sustainable opportunities, according to a statement from the firm.
“The combination of our ESG Vector Score and carbon risk rating creates a transparent and consistent approach to ESG measurement, which is particularly important when it comes to identifying opportunities in emerging markets,” McClenthen says in a statement.
The ESG Vector Score methodology, developed by Northern Trust Asset Management, seeks to identify ESG-related business issues most likely to impact a company’s financial performance and a portfolio’s investment return. This is combined with a special focus on carbon risk.
In partnership with Institutional Shareholder Services (ISS), each company is examined to determine its current carbon emissions, its efforts to reduce its carbon footprint, and its potential exposure to carbon-risk relative to other companies in its industry, according to a statement from the firm.
FEEM targets a reduction in aggregate carbon emissions and carbon reserves relative to its parent index while also targeting an overall improvement in its carbon risk rating.
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