FlexShares

    163

    Funds Group: FlexShares

    Management Company: Northern Trust Investments, Inc., a subsidiary of Northern Trust

    Funds Affected: (1) FlexShares STOXX Global ESG Impact Index Fund, (2) FlexShares STOXX U.S. ESG Impact Index Fund

    Principal Sustainable Investment Management Strategy: ESG Integration, Exclusions

    Summary:

    (1) The fund seeks to achieve investment results that correspond to the STOXX Global ESG Impact Index, an optimized index designed to provide broad market exposure that is tilted toward global companies that score better with respect to a small set of environmental, social and governance (ESG) characteristics and to provide the potential for attractive risk-adjusted performance relative to the STOXX Global 1800 Index, as determined by the index provider, STOXX Ltd., in accordance with its methodology and analytical findings.

    ESG scores are assigned to each eligible company in the STOXX Global 1800 Index through a proprietary model based on select ESG criteria. The STOXX Global 1800 Index is comprised of the 1800 largest companies in the global developed markets, including the U.S. The bottom 50% of companies based on their ESG scores are excluded from the STOXX Global 1800 Index. The weights of the remaining eligible companies in the same index are then adjusted so that companies with higher relative ESG scores are weighted more, and companies with relatively lower ESG scores are weighted less, than they would be in an index that is solely market-capitalization weighted. Component weightings may also be adjusted to ensure that the weight representation of each country in the STOXX Global ESG Impact Index does not vary from that in the STOXX Global 1800 Index by more than +/-1 percentage point and that the weight of a single company is less than 5% at the time of each index rebalancing or reconstitution. Companies that STOXX Ltd. determines do not adhere to the United Nations Global Compact or engage in businesses relating to controversial weapons or coal mining are excluded from the STOXX Global 1800 Index that the fund tracks.

    (2) The fund seeks to achieve investment results that correspond to the performance of the STOXX USA ESG Impact Index, an optimized index designed to provide broad market exposure that is tilted toward U.S. companies that score better with respect to a small set of environmental, social and governance (ESG) characteristics and to provide the potential for attractive risk-adjusted performance relative to the STOXX USA 900 Index, as determined by STOXX Ltd.in accordance with its methodology and analytical findings.

    ESG scores are assigned to each eligible U.S. company in the STOXX Global 1800 Index through a proprietary model based on select ESG criteria. The STOXX Global 1800 Index is comprised of the 1800 largest companies in the global developed markets, including the U.S. The bottom 50% of companies based on their ESG scores are excluded from the STOXX USA 900 Index. The weights of the remaining eligible companies in the same index are then adjusted so that companies with higher relative ESG scores are weighted more, and companies with relatively lower ESG scores are weighted less, than they would be in an index that is solely market-capitalization weighted. Only companies that are U.S. companies as determined by the methodology of STOXX Ltd. are included in the STOXX USA 900 Index. The maximum weight that can be assigned to a single company is limited to 5% at the time of each index rebalancing or reconstitution. Companies that STOXX Ltd. determines do not adhere to the United Nations Global Compact or engage in businesses relating to controversial weapons or coal mining are excluded from the index.