Index Strategy - FEIG

 


FOOTNOTES

1. ESG investing is defined as utilizing environmental, social, and governance (ESG) criteria as a set of standards for a company’s operations that socially conscious investors use to screen potential investments.
2. The Northern Trust Investment Grade US Corporate Bond Index is a sub-index of the Northern Trust US Corporate Bond index with securities that have a minimum credit rating of at least Baa3/BBB-/BBB- by the three rating agencies and each security must have a final maturity of at least one year and up to (but not including) ten years while also having $250 million or more in outstanding principal.
3. The United Nations Global Compact is a non-binding United Nations pact to encourage businesses and firms worldwide to adopt sustainable and socially responsible policies, and to report on their implementation.
4. The Northern Trust ESG Vector Score is designed to rank companies based on their management of and exposure to material ESG metrics. The Score was designed to align with the Sustainability Accounting Standards Board (SASB)
Standards. The SASB Standards were designed for investors, and focus on only financially material issues based on the industry in which the company operates. Based on that structure, the ESG Vector Score is a combination of
individual ESG indicators, adjusted for industry membership.
5. Institutional Shareholder Services (ISS) ESG data enables investors to develop and integrate responsible investing policies and practices, engage on responsible investment issues, and monitor portfolio company practices through screening solutions. It also provides climate data, analytics, and advisory services to help financial market participants understand, measure, and act on climate-related risks across all asset classes.
6. Duration is a measure of risk in bond investing and incorporates a bond's yield, coupon, final maturity and call features into one number, expressed in years, that indicates how price-sensitive a bond or portfolio is to changes in interest rates. Effective duration is defined as the approximate percentage change in a security’s price that will result from a 100-basis-point change in its yield. For example, the price of a bond with an effective duration of two years will rise (fall) two percent for every one percent decrease (increase) in its yield, and the price of a five-year duration bond will rise (fall) five percent for a one percent decrease (increase) in its yield. Because interest rates directly affect bond yields, the longer a bond’s duration, the more sensitive its price is to changes in interest rates.
7. Option Adjusted Spread (OAS) measures the difference in yield between a bond with an embedded option with the yield on Treasuries. Embedded options are provisions included with some fixed-income securities that allow the investor or the issuer to do specific actions, such as calling back the issue. Using historical data and volatility modeling, OAS considers how a bond's embedded option can change the future cash flows and thus the overall value of the bond.
8. All targets are in comparison to the underlying index – the Northern Trust Investment Grade US Corporate Bond Index.