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Index Strategy - ESG



FlexShares STOXX® US ESG Select Index Fund (ESG} and the FlexShares STOXX® Global ESG Select Index Fund (ESGG} are passively managed and use a representative sampling strategy to track their underlying index respectively. Use of a representative sampling strategy creates tracking risk where the Fund's performance could vary substantially from the performance of the underlying index. The Funds are subject to environmental, social and governance (ESG) Investment Risk, which is the risk that because the methodology of the Underlying Indices selects and assigns weights to securities of issuers for non-financial reasons, the Funds may underperform the broader equity market or other funds that do not utilize ESG criteria when selecting investments. The Funds are also at increased risk of industry concentration, where it may be more than 25% invested in the assets of a single industry. For ESGG, investments in foreign market securities involve certain risks such as currency volatility, political and social instability and reduced market liquidity. The Funds may also invest in derivative instruments. Changes in the value of the derivative may not correlate with the underlying asset, rate or index and the Funds could lose more than the principal amount invested.

The STOXX® USA ESG Select KPIs Index offers a broad market exposure that is tilted towards US-based companies that score better with respect to a small set of environmental, social, and governance KPls. Companies are selected and weighted by the following KPls: CDP emission/energy reduction target, percentage of women on the board, percentage of independent directors, policy against child labor, golden parachute agreement. In addition coal miners, violators of United Nations Global Compact principles, and companies involved with controversial weapons are excluded. KP/ standardization by industry and country capping reduce unwanted systematic active exposures.

The Russell 1000 Index is a stock market index that represents the highest-ranking 1,000 stocks in the Russell 3000 Index, which represents about 90% of the total market capitalization of that index.

The Standard & Poor's 500 is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ.