FlexShares ESG & Climate High Yield Corporate Core Index Fund

C000230180 Fund Overview

FlexShares ESG & Climate High Yield Corporate Core Index Fund is a US mutual fund managed by Flexshares Trust, categorised as Corporate Bond. ABC INVEST provides holdings, performance, costs, cashflows, risk data, prospectus documents and SEC filings, sourced from SEC filings.

• Type: US mutual fund
• Manager: Flexshares Trust
• Category: Corporate Bond
• Assets under management: $18.81M
• 1-year return: 0.3%
• SEC CIK: 0001491978
• SEC series ID: S000073361
• Share class ID: C000230180

C000230180 Investment Objective and Strategy

FlexShares ESG & Climate High Yield Corporate Core Index Fund describes its objective and strategy as follows, from its latest prospectus filed with the SEC by Flexshares Trust.

Investment objective

The Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Northern Trust ESG & Climate High Yield U.S. Corporate Core Index SM (the Underlying Index).

Principal investment strategy

The Underlying Index is designed to reflect the performance of a selection of U.S.-dollar-denominated high-yield corporate bonds issued by companies that exhibit certain environmental, social and governance (ESG) characteristics, while also seeking to provide broad-market, core exposure to U.S.-dollar-denominated high-yield corporate bonds (sometimes referred to as junk bonds) of U.S. and non-U.S. issuers. The Underlying Index is designed to minimize tracking differences relative to the performance of the Northern Trust High Yield US Corporate Bond Index SM (the Parent Index) while also seeking (a) an aggregate higher scoring of certain ESG characteristics, as measured by the Northern Trust ESG Vector Score (ESG Vector Score) described below, and (b) reduction of aggregate climate-related risk, as measured by certain carbon-related risk metrics, each relative to the Parent Index.

The Underlying Index also excludes certain companies by using controversial business involvement and norms-based screens. The Parent Index is a market-capitalization weighted index comprised of US dollar-denominated high yield corporate bonds. In order to be eligible for inclusion in the Parent Index, a security must be a US-dollar-denominated corporate bond that is publicly offered in the United States or offered pursuant to Rule 144A under the Securities Act of 1933, with or without registration rights. A security also must be rated below investment grade but not deemed in default (a rating within Ca/C- to Ba1/BB+) by a Nationally Recognized Statistical Rating Organization (NRSRO). Bonds that are rated investment grade status or that enter into default post reconstitution are removed at the next scheduled reconstitution of the Parent Index.

In addition, a security eligible for inclusion in the Parent Index must have (i) a final time to stated maturity of at least 18 months from the date of its issuance, (ii) a remaining stated maturity that is greater than or equal to one year at time of each reconstitution and (iii) an outstanding principal balance of least $1 50 million at time of each constitution of the Parent Index. The Fund does not have any portfolio maturity limitation and may invest its assets from time to time in instruments with varying maturities. NTI in its capacity as Index Provider (the Index Provider) applies an ESG Vector Score to each of the companies in the Parent Index. The ESG Vector Score is designed to rank companies based on their management of and exposure to material ESG metrics as defined by the Sustainability Accounting Standards Board (SASB) Standards and a corporate governance score for each company.

NTI calculates and maintains ESG Vector Scores for companies using data from third-party data providers. The SASB Standards identify financially material ESG issues for a company based on its industry classification within the following five dimensions: (i) environmental; (ii) social capital; (iii) human capital; (iv) business model and innovation; and (v) leadership and governance. The preliminary ESG score is then adjusted up or down based on a quantitative assessment of how a company is managing the risks associated with those material ESG issues relative to its peers based on the recommendations of the Task Force on Climate-related Financial Disclosures to evaluate a company through governance, strategy and risk management lenses. The adjusted ESG score generates 80% of the ESG Vector Score.

Finally, a distinct corporate governance score is applied to each company with respect to its (i) board and management quality and integrity; (ii) board structure; (iii) ownership and shareholder rights; (iv) remuneration; (v) financial reporting; and (vi) stakeholder governance, which generates 20% of the ESG Vector Score. In addition to applying the ESG Vector Score, the Index Provider uses data from Institutional Shareholder Services ESG Solutions to assess carbon emissions intensity and a carbon risk rating for each company. Carbon emissions intensity measures (i) direct greenhouse gas emissions from sources controlled or owned by the company (e.g., emissions associated with fuel combustion in boilers, furnaces, or vehicles); and (ii) indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat or cooling against the value of the company enterprise-wide.

The ISS Carbon Risk Rating provides an assessment of a companys ability to mitigate the risks of transition to a lower carbon economy risks based on its specific baseline carbon risk exposure. At the time of each reconstitution of the Underlying Index, the Index Provider uses an optimization process to select and weight securities in the Parent Index to seek to (i) minimize the potential for tracking differences for the Underlying Index; (ii) increase the aggregate ESG Vector Score for the companies in the Underlying Index; (iii) reduce the aggregate carbon emissions intensity of the companies in the Underlying Index; and (iv) improve the aggregate carbon risk rating of the companies in the Underlying Index, each relative to the Parent Index. It is possible that the Underlying Index will include (and therefore the Fund could invest in) securities that, individually, have a low ESG Vector Score or high carbon-related risk relative to the aggregate ESG score or carbon-related risk of the Parent Index.

The optimization also includes sector, country, turnover, issuer and weight constraints so that these characteristics in the Underlying Index vary within acceptable bands relative to the Parent Index. Certain eligible securities are excluded from the Underlying Index by the Index Provider, using proprietary screening definitions and data from Sustainalytics and other independent ESG data providers, which may change from time to time. Excluded companies include those which are involved in (i) verified infringement of established international initiatives and guidelines, including United Nations Global Compact Principles and Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Entities; (ii) the production of tobacco; and (iii) manufacturing of controversial weapons.

Excluded companies also include those which derive a certain percentage of revenue (e.g., 5% or more) from (a) manufac- turing of civilian firearms; (b) manufacture, retailing, and distribution of small arms (assault and non-assault) weapons or components; (c) manufacturing of conventional weapons or providing support services through military contracting; (d) thermal coal extraction; (e) coal-fired energy generation; (f) oil sands and shale; (g) arctic oil with weak management of carbon within their products and services; (h) the retail sale of tobacco and tobacco related products or services; and (i) the running of private prisons. The above-described exclusionary screens are applied with each reconstitution of the Underlying Index. The Underlying Index is a new index with an inception date of July 30, 2021.

As of December 31, 2022 there were 1,108 issues in the Underlying Index. The Underlying Index is governed by transparent, objective rules for security selection, exclusion, rebalancing and adjustments for corporate actions. The Underlying Index will be reconstituted monthly under normal market conditions. The Fund generally reconstitutes its portfolio in accordance with the Underling Index. NTI uses a passive or indexing approach to try to achieve the Funds investment objective. Unlike many investment companies, the Fund does not try to beat the index it tracks and does not seek temporary defensive positions when markets decline or appear overvalued. NTI uses a representative sampling strategy to manage the Fund. Representative sampling is investing in a representative sample of securities that collectively has an investment profile similar to the Underlying Index.

The Fund may or may not hold all of the securities that are included in the Underlying Index. The Fund reserves the right to invest in substantially all of the securities in its Underlying Index in approximately the same proportions (i.e., replication) if NTI determines that it is in the best interest of the Fund. Under normal circumstances, the Fund will invest at least 80% of its total assets (exclusive of collateral held from securities lending) in the securities of the Underlying Index. The Fund may also invest up to 20% of its assets in cash and cash equivalents, including shares of money market funds advised by NTI or its affiliates, futures contracts and options on futures contracts, as well as securities not included in the Underlying Index, but which NTI believes will help the Fund track its Underlying Index.

The Underlying Index is created and sponsored by NTI, as the Index Provider. NTI also serves as the investment adviser to the Fund. The Index Provider determines the composition and relative weightings of the securities in the Underlying Index and publishes information regarding the market value of the Underlying Index. The Fund may lend securities representing up to one-third of the value of the Funds total assets (including the value of the collateral received). The Fund is non-diversified under the Investment Company Act of 1940 (1940 Act), as amended, and may invest more of its assets in fewer issuers than diversified funds. Industry Concentration Policy . The Fund will concentrate its investments (i.e., hold 25% or more of its total assets) in a particular industry or group of industries to approximately the same extent that the Underlying Index is concentrated.

C000230180 Performance

Total returns for C000230180 (as of 2026-10-01), from SEC filings.

C000230180 Risk Information

Risk metrics for C000230180, derived from monthly returns in SEC filings.

• 1-year volatility (annualised): 12.4%

C000230180 Costs and Fees

C000230180 costs about $23 per $10,000 invested per year in fund expenses.

• Net expense ratio: 0.23%
• Gross expense ratio: 0.24%
• Portfolio turnover: 119%
• Brokerage commissions: 0.00 bps of average net assets (SEC N-CEN)

C000230180 Cashflows

Over the 12 months to 2023-04, FlexShares ESG & Climate High Yield Corporate Core Index Fund had net outflows of $7.89M, from monthly SEC N-PORT filings.

C000230180 Debt Constituents

No individual debt constituents are reported in FlexShares ESG & Climate High Yield Corporate Core Index Fund's latest SEC N-PORT filing.

C000230180 Prospectus and SEC Filings

Official FlexShares ESG & Climate High Yield Corporate Core Index Fund filings on SEC EDGAR — prospectus, portfolio holdings and annual reports.

• Prospectus (485BPOS) — filed 2023-02-27
• Prospectus (485BPOS) — filed 2022-02-25
• Prospectus (485BPOS) — filed 2021-09-03
• Portfolio holdings (N-PORT) — filed 2023-06-26
• Portfolio holdings (N-PORT) — filed 2023-03-24
• Portfolio holdings (N-PORT) — filed 2022-12-27
• Annual census (N-CEN) — filed 2023-01-13
• Annual census (N-CEN) — filed 2022-01-14

Related Funds

Other Corporate Bond funds tracked on ABC INVEST:

• First Trust Preferred Securities and Income ETF (FPE)
• Nuveen Preferred Securities and Income Fund (NPSAX)
• Spectrum Preferred and Capital Securities Income Fund (PNARX)
• Invesco Variable Rate Preferred ETF (VRP)
• First Trust Institutional Preferred Securities and Income ETF (FPEI)

Data Sources

ABC INVEST compiles this page from public filings made to the U.S. Securities and Exchange Commission (SEC) through EDGAR: portfolio holdings and monthly cashflows from Form N-PORT, expenses and returns from fund prospectuses (Form 485BPOS) and the SEC DERA Risk/Return Summary data sets, annual data from Form N-CEN, and shareholder reports from Form N-CSR.