Northern Trust enhances compliance monitoring capabilities

Source: Northern Trust

Northern Trust announced today that it has enhanced its investment compliance monitoring capabilities for institutional asset servicing and wealth management clients globally, by expanding the range of environmental, social and governance (ESG) factors monitored by Northern Trust Compliance Analyst to help clients meet responsible investing goals.

Compliance Analyst is a customizable, Web-based tool that alerts investors when portfolios are nearing or have breached established limits in a client's investment policy. In addition to corporate governance rankings and the 10 socially responsible investment restrictions currently available on Compliance Analyst, Northern Trust has extended its agreement with RiskMetrics Group to offer additional screening capabilities that cover the following issues:
  • Prohibited Nations - Companies with business or other ties to nations identified by U.S. legislation or government authorities as supporting terrorism or human rights violations. Sanctioned nations include Iran, Sudan, Myanmar (Burma), Cuba, North Korea and Syria.
  • Shari'ah Law - Companies with connections to activities that violate Islamic law, including prohibitions on predatory lending, pig farming or pork production, alcohol, adult entertainment, gambling, tobacco and weapons.
  • Landmines and Cluster Bombs - Companies that have an industry tie to landmines/cluster bombs or are investors in those industries, including whole system and component manufacturers.
  • Animal Testing/Welfare - Expansion of current data to identify U.S. and non-U.S. companies that are involved in a range of activities including pharmaceutical and other testing of animals, and breeding or dealing lab animals.

"These enhancements greatly increase the number of companies covered by Northern Trust's ESG screening capabilities across a significant number of concerns," said Sandra Landrum, senior product developer for Northern Trust Investment Risk and Analytical Services. "Through Compliance Analyst, clients can monitor their manager's adherence to ESG investment guidelines in a number of ways. Our functionality allows users to set limits on the percentage of the portfolio invested in each socially responsible investment category, with portfolio holdings analyzed individually or in aggregate, and an automated notification issued when holdings exceed the allowed limit."

In addition to screening for social factors, Northern Trust currently offers corporate governance rankings to assist institutional investors in evaluating the quality of corporate boards as a basis for investment decisions. The Investment Risk and Analytical Services group is also developing a combination of monitoring and ranking methods to assess and compare a company's progress related to environmental and sustainability factors.

Northern Trust relies on RiskMetrics ESG data to identify companies that derive revenue from a particular source, such as tobacco, alcohol or gambling, or to rank more than 8,000 companies around the world according to its Corporate Governance Quotient (CGQ). Compliance Analyst enables users to set tolerance levels for ESG guidelines to exclude or limit investments in companies or industries according to the investment policy. All ESG notifications and reports are delivered through Northern Trust Passport, a client information system that integrates Northern Trust and third-party financial information through a single Web portal.

"With these enhancements and new guidelines, Compliance Analyst can support a wide scope of ESG investment strategies," said Lenora Kelley, risk services senior product manager for Northern Trust Investment Risk and Analytical Services. "As responsible investing continues to evolve, Northern Trust is committed to maintaining a leadership position in helping institutional and wealth management clients meet risk and return objectives while investing in companies that operate within sound internal governance practices, have an outlook toward protecting the environment and are socially aware."

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