Corporate Social Responsibility

ACHIEVE GREATER NORTHERN TRUST 2017 CORPORATE SOCIAL RESPONSIBILITY REPORT

Corporate Social Responsibility at Northern Trust 1 CORPORATE SOCIAL RESPONSIBILITY AT NORTHERN TRUST

“Northern Trust values CSR as an essential element of our mission and culture. Our stakeholders expect us to be responsible stewards of the ’s resources, balancing appropriate levels of prudence and risk to create value. We take that responsibility seriously, as demonstrated through our commitment to Achieve Greater through our CSR strategy.”

MICHAEL G. O’GRADY President and Chief Executive Officer

Corporate Social Responsibility at Northern Trust 2 CORPORATE SOCIAL RESPONSIBILITY STRATEGIC FOCUS

CORE ASPECTS EMPLOYEES Focus on Recruit, retain governance, and develop citizenship and diverse talent operations

SHARED VALUE SUSTAINABLE Generate PRODUCTS AND economic value SERVICES in a way that also Build market produces value strength through for society innovation

Corporate Social Responsibility at Northern Trust 3 TABLE OF CONTENTS

LETTER FROM CONNIE L. LINDSEY AND EMPLOYEES...... 15 MICHAEL G. O’GRADY...... 5 Talent Management and Education...... 15 BASIS FOR REPORT...... 6 Diversity...... 15 Report Content ...... 6 Resource Councils...... 17 Period, Scope and Boundary...... 6 Global Diversity and Inclusion Strategy and Governance...... 17 Stakeholder Engagement...... 6 Human Rights and Workforce Principles...... 18 Reporting Framework...... 6 SHARED VALUE...... 20 Material Aspects...... 6 Corporate Alignment ...... 20 Corporate Social Responsibility Key Performance Indicators...... 7 SUSTAINABLE INVESTING AT NORTHERN TRUST...... 23 HONORS...... 8 Northern Trust ESG Funds...... 23 CORE ASPECTS...... 9 Stewardship...... 24 Governance ...... 9 Global Sustainable Investing Team ...... 24 Ethics...... 9 SELECTED MEMBERSHIPS...... 25 Government Relations and Political Contributions...... 10 The United Nations Environmental Programme OPERATIONS...... 11 - Finance Initiative (UNEP FI)...... 25 Corporate Services Group and Environmental Policies ...... 11 The Boston College Center for Corporate Citizenship (BCCCC)...... 25 Non-Governmental Organizations and Advocacy Groups ...... 11 Enterprise Enablement ...... 12 United Nations Principles for Responsible Investing (UNPRI)...... 25 The Sustainability Network ...... 12 Local Communities...... 13 Association of Corporate Citizenship Professionals (ACCP)...... 25 Procurement...... 13 Institutional Investors Group on Climate Change (IIGCC)...... 25 Supplier Diversity...... 14

Corporate Social Responsibility at Northern Trust 4 LETTER FROM Northern Trust values corporate social responsibility (CSR) as an essential element of our CONNIE L. LINDSEY AND mission and culture. Our stakeholders expect us to be responsible stewards of the company’s resources, balancing appropriate levels of prudence and risk to create value. We take that MICHAEL G. O’GRADY responsibility seriously, as demonstrated through our commitment to Achieve Greater through our CSR strategy. We are pleased to present our eighth CSR report prepared using the Global Reporting Initiatve (GRI) standards. The Northern Trust 2017 CSR Report emphasizes our key priorities related to governance, citizenship and operations; employees; shared value; and sustainable products and services. Our impact is driven by our strategic focus on diversity and inclusion, community engagement and environmental sustainability. As the report details, we achieved several notable milestones in 2017, including introducing electric cars to our India office, contributing over $19 million USD globally to philanthropic organizations and signing the UK’s Women in Finance Charter. Our environmental, social and governance (ESG) assets under management grew 37 percent to $86 billion. Northern Trust was named one of the “World’s Most Admired ” by Fortune Magazine for the 11th consecutive year and earned an “A-” rating from the CDP for greenhouse gas emissions disclosures and climate action.

At the end of 2017, Frederick H. Waddell retired from his role as Chief Executive Officer and remains Chairman of the Board. We commend him for the guidance he provided towards the many CSR milestones Northern Trust reached during his tenure, and for his role in helping Northern Trust continue its legacy of outstanding service, expertise and integrity. These principles guide how we do business and serve shareholders, clients, communities and each other, laying a foundation for future generations to Achieve Greater.

We look forward to engaging with you as you read our report, and in the years to come.

Connie L. Lindsey Michael G. O’Grady Executive Vice President President and Chief Executive Officer Head of Corporate Social Responsibility and Global Diversity & Inclusion

Corporate Social Responsibility at Northern Trust 5 BASIS FOR REPORT

REPORT FOR CONTENT STAKEHOLDER ENGAGEMENT MATERIAL ASPECTS This report has been created in response to Northern Trust actively engages in dialogue with The report and its index provide details on interactions with key stakeholder groups. Each our stakeholders, including clients, employees, the material aspects and topics that reflect stakeholder group is expected to use this report shareholders, communities, regulators, suppliers economic, environmental and social impacts to gauge Northern Trust’s progress on achieving and peers. These stakeholder groups are relevant to our business. During 2017, we set Northern Trust’s goals pertaining to environmental, determined based on our business strategy of specific key performance indicators aligned to social and governance matters. serving , institutions and affluent the Sustainable Development Goals adopted individuals worldwide. Each stakeholder group by the United Nations and will continue to PERIOD, SCOPE AND BOUNDARY affects our reputation, policies and best practices. measure progress against these indicators. We believe it is imperative to consult regularly This report is based on information obtained, with these groups through periodic in-person Core Aspects - Governance, Ethics and Operations, created and compiled for the fiscal year ended meetings, electronic communication, conferences Responsible Sourcing and Environmental Impacts December 31, 2017. Our previous report was and other platforms. Through these interactions, Employees - Global Talent Management, for the year ended December 31, 2016. The we receive suggestions and concerns related to Diversity and Inclusion boundary of this report includes 100 percent of our business practices. our leased and owned offices and 100 percent Shared Value - Community Development, Global of our workforce in all global regions in which we Philanthropy and Volunteerism REPORTING FRAMEWORK operate. In 2017, we expanded our operations in Sustainable Products and Services - the Europe, Middle East and Africa (EMEA) region This is our eighth year using the Global Reporting Environmental, Social and Governance Integration, by acquiring UBS Asset Management’s fund Initiative framework. We are a member of the Responsible Investment Products and Services administration servicing units in Luxembourg GRI Standards Pioneer Program, and this is our and Switzerland. In North America, we opened second report using GRI Standards, the GRI's fifth Questions related to this report can be sent to a second office in Tempe, AZ. We are only generation of guidelines for sustainability reporting. [email protected]. reporting on aggregated data from wholly owned This report has been prepared in accordance with subsidiaries. No joint ventures or other entities are the GRI Standards: Core option. included unless otherwise noted. There are no restatements from prior years and no significant changes in size, structure, supply chain or ownership from previous reporting periods.

Corporate Social Responsibility at Northern Trust 6 CORPORATE SOCIAL RESPONSIBILITY KEY PERFORMANCE INDICATORS OVERVIEW

Sustainable 2015 - 2020 Status Development Goals

Core Aspects Reduce carbon emissions by 25 percent

Increase number of suppliers screened using environmental and social criteria

Employees Update and communicate global diversity and inclusion goals

Achieve goal of 35 percent women with senior or executive vice president title in UK by December 2020 per the UK Women in Finance Charter

Establish process to deliver on the goals of the CEO Action for Diversity & Inclusion

Shared Value Remain in the top quartile of charitable giving amongst our peers

Increase volunteer hours by 5 percent each year through 2020

Maintain outstanding CRA rating

Sustainable Formalize ESG investing philosophy Products and Services Continue to evolve proxy voting policies and practice to capture emergent ESG risks

Increase our number of engagements with companies on ESG related issues & opportunities

In progress Complete

Corporate Social Responsibility at Northern Trust 7 HONORS BEST BANKS IN AMERICA NORTHERN TRUST HIGHLIGHTS Forbes, 2017 (as of and for the year ended December 31, 2017)

BEST PRIVATE BANK FOR FAMILY OFFICES (GLOBAL) Assets under $ Financial Times Group, 2017 custody 8.1 ONE OF THE “WORLD’S trillion MOST ADMIRED COMPANIES” Fortune Magazine, 2017 –11th Consecutive Year $ Assets under 1.2 100 BEST CORPORATE CITIZENS management trillion Corporate Responsibility Magazine, 2017

BEST PLACES TO WORK FOR LGBT EQUALITY Corporate Equality Index, 2017 – 8th Consecutive Year Return on equity 12.6 percent TOP 50 COMPANY FOR EXECUTIVE WOMEN National Association for Female Executives, 2017 –7th Consecutive Year

TOP 50 COMPANIES FOR LATINAS TO WORK FOR IN THE UNITED STATES Latina Style Magazine, 2017

100 BEST COMPANIES FOR WOMEN IN INDIA Working Mother & AVTAR, 2017

FTSE4GOOD GLOBAL INDEX 2017 – 11th Consecutive Year

DOW JONES SUSTAINABILITY NORTH AMERICA INDEX 2017 – 7th Consecutive Year

Corporate Social Responsibility at Northern Trust 8 CORE ASPECTS

Governance Ethics Connie L. Lindsey, Executive Vice President and All global employees are expected to adhere to TRUSTWORTHY LIVE Head of Corporate Social Responsibility and and uphold our core values, exercise the highest Global Diversity & Inclusion, is responsible for ethical judgment and comply with laws that apply Trustworthy Live expands on the design and execution of a comprehensive to their duties. Employees also must follow all laws Northern Trust’s ongoing CSR strategy. Ms. Lindsey reports directly to and regulations and avoid any situation that may Trustworthy program, a video series Michael G. O’Grady, the President and Chief trigger a conflict of interest. We expect employees that features stories about real people Executive Officer of Northern Trust to treat all appropriate information as confidential; in challenging business situations, (the “Corporation”). Ms. Lindsey also chairs breaches of confidentiality obligations may bring by integrating in-person events and the Executive Corporate Social Responsibility disciplinary action. All employees are required engaging speakers. These speakers Council, a group of senior employees that to take three courses annually: “Global AML & include representatives of law enables the implementation of Northern Trust’s Sanctions,” “Information Security at Northern Trust” enforcement agencies, who highlight CSR strategy through the setting and tracking and “Standards of Conduct Policy.” high-risk areas in the financial markets, of goals related to material aspects of our CSR All employees are required to certify their new trends in fraud and anti-money strategy, including sustainability initiatives. compliance with the Code of Business Conduct laundering activity and red flags that The Corporation’s Board of Directors provides and Ethics and complete the Standards of may help to alert Northern Trust of this general oversight of Northern Trust’s corporate Conduct Policy Training course, which contains citizenship and social responsibility matters information related to anti-corruption. Both behavior. In addition, the program will of significance to the Corporation and its certification and training were completed by continue to feature video clips and subsidiaries. This oversight is facilitated by the 100 percent of employees. targeted trainings that reinforce these messages as well as topics of conduct Board’s Corporate Governance Committee. Annual anti-corruption training is required for and inherent bias. Throughout the Oversight of certain financial and operational client-facing personnel as well as global marketing, risks associated with climate change and other finance, audit, legal and compliance professionals. program, employees are reminded environmental risk factors is also provided In addition, we provide expanded anti-corruption of the importance of adhering to our by the Board’s Business Risk Committee training to employees in the Europe, Middle East core principles: service, expertise through its oversight of the Corporation’s and Africa and Asia-Pacific (APAC) regions in and integrity. global risk management framework and risk accordance with regulatory requirements. management policies.

Corporate Social Responsibility at Northern Trust 9 Government Relations and Political Contributions by Employees Northern Trust sponsors both a federal-only political action committee (PAC) and a multi-candidate PAC. Political Contributions Northern Trust expects employees to seek Both PACs are allowed to solicit a restricted class of Northern Trust concentrates its public policy guidance and pre-clear certain individual Northern Trust’s U.S. employees for contributions. positions in areas most relevant to its . political contributions. More detailed Northern Those contributions are used to support candidates Our public policy and lobbying focus includes, Trust policies and procedures that apply to all who support effective legislation important to among other things, United States federal, state, employees or certain groups of employees are Northern Trust. All contributions to the PACs are municipal and European Union financial regulatory set forth in pre-clearance procedures and other voluntary; employees are neither favored nor reform efforts. We work with the limited number documents, including federal, state and municipal disadvantaged based on their participation. of trade associations of which we are a member, “pay-to-play” policies and procedures. Decisions about potential contributions are and we also meet directly with members of the U.S. reviewed and approved by the leadership of the Congress, state and municipal legislators, regulators Corporate and Political Action Committee respective PACs based on the public policy interests and other government officials globally to discuss Political Contributions of Northern Trust. Our PAC contributions in 2017 our positions and make recommendations for Northern Trust engages in the political process totaled $66,900. Federal lobbying reports may be improved policy and regulation. in order to advance and protect its long-term found at: www.senate.gov/legislative/Public_ interests. Northern Trust does not contribute At the United States federal level, we focus on Disclosure/LDA_reports.htm, and our financial directly to candidates for public office. However, proposed regulatory and policy changes that will contributions can be found at: www.fec.gov/ Northern Trust contributes corporate funds to affect our businesses. This includes supporting finance/disclosure/candcmte_info.shtml. changes that will enhance the safety of client industry trade organizations in support of the assets and promote the safety and soundness of company’s public policy objectives. Participation the financial system and a strong global economy. in these organizations is important to gaining At the state and municipal level, we regularly industry insight, fostering relationships and meet with elected and appointed officials to professional opportunities within the industry and discuss public policy positions that will affect our collaborating on public policy topics of mutual businesses. In appropriate circumstances, we file interest. The principal trade associations to which comment letters to proposed federal regulations, we belong are the American Bankers Association, copies of which are made publicly available by the Roundtable, the Investment the applicable regulatory agencies. Company Institute and the Securities Industry and Financial Markets Association. We also belong to the The Corporate Governance Committee of the Illinois Bankers Association, the California Bankers Board of Directors provides oversight of the Association and The Florida Bankers Association. political, lobbying and other public advocacy activities of Northern Trust, including significant trade association memberships.

Corporate Social Responsibility at Northern Trust 10 OPERATIONS

Corporate Services Group and We use energy to power our data centers and our emissions by 25 percent from our 2015 baseline Environmental Policies facilities, the majority of which are located in North by the end of 2020. Northern Trust’s Corporate Services Group, charged America. As a result, the bulk of our greenhouse gas MARKET-BASED: METRIC TONS OF CO2E PER FTE with management of our real estate portfolio, (GHG) emissions stem from our North American operations. We first started tracking our carbon procurement and facilities services, executes 2015 2016 2017 Northern Trust’s objective of reducing or eliminating footprint, comprised of the carbon dioxide Scope 1 - per FTE 0.190 0.139 0.119 negative environmental impacts from our supply equivalent of all GHGs produced in our operations, chain. We detail our environmental expectations in 2006. Since then, we have improved our data Scope 2 - per FTE 2.850 2.636 2.346 collection processes and calculation methodologies of vendors by providing them our Supplier Code Scope 3 - per FTE 1.242 1.095 1.164 of Conduct. Vendors’ sustainable practices are to align with the GHG Protocol. Total - per FTE 4.282 3.869 3.669 factored into our selection process, and we regularly Working closely with our building managers, Total Full-Time 16,152 16,874 17,830 review suppliers’ adherence to the Supplier Code Northern Trust follows the best environmentally Employees of Conduct and pursue corrective measures when friendly building strategies and practices outlined necessary, as noted in our Global Procurement Policy. by The U.S. Green Building Council’s Leadership in Non-Governmental Organizations and Northern Trust recognizes that the long-term Energy and Environmental Design (LEED) program. Advocacy Groups Among our offices in North America and APAC, we viability of our business and that of our clients We believe collaborating with non-governmental have received two LEED platinum certifications, is tied to the health and well-being of our organizations (NGOs) and advocacy groups allows seven gold certifications, one silver certification and planet. We therefore commit to protecting and us to maintain transparency and hold ourselves one general certification. In addition, we use reliable preserving the environment and to eliminating or accountable to our environmental sustainability and sophisticated tracking programs to monitor and mitigating any negative environmental impacts practices. Northern Trust and our surrounding manage our environmental performance and to from our operations. communities benefit when we publicly report calculate our annual carbon footprint. We align our business with the fundamental principle our environmental footprint—such as our of sustainability—meeting the needs of the present After the completion of a comprehensive study in GHG emissions, energy use and the risks and generation without compromising the ability of 2015, we set a goal to reduce our total Scope 1, opportunities associated with climate change— future generations to meet their own needs. We do Scope 2 (using the market-based approach) and under the supervision and guidelines of reputable this by integrating environmental considerations Scope 3 carbon emissions by 3 percent per full-time third-party organizations. By joining communities into our company-wide decision-making processes, employee (FTE) by 2020, using our 2015 emissions of investors who hold the health of our planet committing to improving continually our business as a baseline. By the end of 2016, we had already in high regard alongside the success of their practices and delivering tangible, positive results exceeded that goal, reducing our emissions by 9.65 business establishments, Northern Trust strives to related to the environment. percent. As result, we have set a new goal to reduce affect positive change in corporate responsibility to our environment.

Corporate Social Responsibility at Northern Trust 11 The NGOs with which we collaborate include the U.S. Green Building Council, the Carbon NORTHERN TRUST INTRODUCES ELECTRIC CARS TO INDIA LOCATIONS Disclosure Project and the Institutional Investors Group on Climate Change. As a service to its employees, Northern Trust years, equivalent to 1.6 million car miles provides all staff in India with round trip (2.6 million kilometers). Cost-effective and Enterprise Enablement transportation between home and work. environmentally friendly, this initiative is Northern Trust's Enterprise Enablement In 2016, out of concern for the emissions an important step towards Northern Trust department works to ensure our infrastructure is produced by the vehicles used in this service, meeting its overall carbon target. used efficiently and contributes to our ongoing Northern Trust changed its service provider efforts in conservation and sustainability. to one offering cleaner, more efficient Benefits to Northern Trust India’s Because powering data centers accounts for a conversion to electric cars considerable amount of our carbon footprint, vehicles and a dedicated fleet. Real-time we attempt to consolidate servers or downsize monitoring and automated routing have Community them through virtualization. We also optimize led to a reduction in the number of miles power and resource utilization by life-cycling older traveled, resulting in a 7 percent savings in Quieter Less Cleaner air equipment into more energy efficient devices, carbon emissions compared with 2015. To vehicles congestion increasing signage encouraging recycling, using further reduce our carbon footprint, our India teleconferencing to reduce business travel and team leased a fleet of electric vehicles to defaulting to smart printing features. provide employees a low-carbon, quiet, clean Safety and comfortable transport service. The Sustainability Network Vetted GPS tracking Smarter In 2017, we rebranded our Partners Think Green As part of the initiative, ten new electric drivers of vehicles vehicles (PTG) program as the Sustainability Network. cars rolled off the production line to our The Sustainability Network is Northern Trust’s Bangalore and Pune locations during global employee environmental engagement 2017 and another ten are planned for Environmental program aimed at increasing awareness of 2018. Fast-charging points have been sustainability issues, promoting best practices installed to ensure consistent and reliable Reduction Obviation of Less and unifying environmentally focused business service. The new electric cars will save 680 in footprint diesel use pollution operations under the same umbrella. This metric tons of carbon dioxide over three program enables close collaboration between our building managers and “sustainability

Corporate Social Responsibility at Northern Trust 12 champions” (employee volunteers) in delivering Procurement outside of the United States to complete an anti-bribery questionnaire consistent environmental messages, gauging Northern Trust’s supply chain supports our global employee feedback and advocating for increased footprint through the use of suppliers of various • Requiring suppliers to obey the laws of the commitment to conservation and protection types and sizes. These firms provide services country of manufacture, sale and distribution of environmental resources. The Sustainability in the categories of business, technology and • Coordinating a supplier management Network organizes Earth Day celebrations as well as market data. other environment-related volunteer opportunities program that assesses risk, monitors and has been a key activator of behavior change in These suppliers allow Northern Trust to support the performance and promotes continuous Northern Trust’s culture around climate change and needs of our clients and employees in our North improvement activities other environmental issues. America, EMEA and APAC regions. Northern Trust Our approach to supplier relationship expects vendors to conduct business in an ethical, management (SRM) ensures that an appropriate Local Communities legal and socially responsible manner. We specify level of oversight and structure is established with these terms and conditions in our procurement Northern Trust functions as a global citizen whose each of Northern Trust’s suppliers. This process policy and review it during vendor evaluations. contribution to building a healthy, sustainable maximizes relationships with suppliers, resulting environment involves deep regard for the Northern Trust’s global procurement department in ongoing risk mitigation and value delivery that surrounding communities. Our footprint affects the is led by a senior-level manager, the Global Head meets or exceeds contracted value. We continue larger ecological system and can make tangible of Procurement, who drives the strategy and sets to invest in and review new SRM techniques and differences in the lives of community members, policies worldwide. Northern Trust is committed processes that will increase coverage to more which is why we strive to forecast and reduce to integrating ethical, social and environmental supply categories. any environmental risks or harm created by our factors into our global procurement policy, as business operations. reflected in our Supplier Code of Conduct The goals of Northern Trust’s vendor management program are to: We also believe in the power of community-based (northerntrust.com/about-us/procurement). actions to effect positive change for the good of We check our vendors with the U.S. Office of • Provide and implement the framework to our planet and future generations. Northern Trust Foreign Asset Control to ensure we comply monitor and manage vendors commits its resources, including capital support with any economic and trade sanctions. In • Ensure consistency and compliance with and employee volunteerism, to local initiatives and 2017, we also published our first UK Modern regulatory guidance organizations focused on environmental awareness Slavery Act statement. • Instill a continuous improvement and protection. We are a longstanding sponsor of philosophy into the supplier relationship the Chicago Botanic Garden as well as other land Other aspects of our global procurement trust organizations and local youth programs that program include: • Ensure compliance with contractual terms and conditions aim to increase appreciation of biodiversity and • Completing due diligence requiring any motivate sustainable actions in everyday life. supplier providing goods and/or services

Corporate Social Responsibility at Northern Trust 13 The vendor management process includes: Our procurement policy promotes a fair and In 2017, we spent more than $160 million with objective bidding process by neither requiring the minority- and women-owned companies and • Using vendor segmentation use of local suppliers nor measuring our spending firms owned by individuals with disabilities. • Applying a governance model appropriate with local or regional suppliers. Northern Trust continues to bring diverse for the vendor’s designated segment suppliers into our supply chain. Supplier Diversity • Administering jointly developed key We collaborate with various organizations to performance indicators Supplier diversity is an essential component of focus on economic development, growth and a world-class global procurement organization. • Developing and implementing a vendor learning, including the Chicago Minority Supplier How and with whom we do business reflects our management plan Development Council, the Women’s Business commitment to developing and supporting diverse Development Center, Chicago United and the • Assigning vendor managers the business owners. Diverse suppliers who work with Chicago Area Gay and Lesbian Chamber of responsibility for specific activities us as partners contribute to our bottom line and Commerce. Northern Trust is an active member required by the segmentation foster increased competition and innovation as of the Financial Services Roundtable of Supplier • Monitoring and reporting on the status of well as enhance our ability to provide clients with Diversity for the National Minority Supplier open vendor issues excellence in service. Development Council, an organization that aims • Establishing performance improvement Northern Trust considers supplier diversity to provide a direct link between large corporations goals for ongoing vendor relationships a corporate strategy supported by senior and minority-owned businesses. as needed management and executed via our procurement professionals. Northern Trust’s supplier diversity • Conducting regular vendor business program is led by a senior-level manager, the review meetings director of supplier diversity.

Corporate Social Responsibility at Northern Trust 14 EMPLOYEES

We recognize that our employees are critical programming for managers on various • Mentoring assignments to our success, and we take our search for and management and leadership topics. These • Targeted development and leadership retention of top talent seriously. We target our interactive programs provide peer networking skill-building talent identification, talent sourcing methods and opportunities and direct access to well-known • Exposure to senior leadership recruiting strategies to specific locations using a expert facilitators. Northern Trust also offers an variety of channels including job boards, colleges, educational assistance program that encourages Diversity networks, associations and online social networks. employees to pursue further education. To Northern Trust values diversity as an essential We base hiring decisions on a variety of factors, encourage employees at all levels to seek element of our corporate culture. The broad including educational background, diversity, mentoring opportunities, our new mentoring array of perspectives that result from acquiring, relevant experience, past accomplishments, guidebook includes tools and resources to enable developing and retaining a globally diverse professional licensing and strong evidence of a mentoring relationship. workforce is a crucial contributor to our excellence integrity and ethical behavior. Northern Trust administers multiple leadership and innovation across our business practices and a Talent Management and Education programs tailored by career level and focused on driver of our community engagement. building a healthy pipeline of leadership talent to Northern Trust employees averaged 21 hours Northern Trust’s Head of Corporate Social meet our evolving business needs. of training-for a total of more than 380,000 Responsibility and Global Diversity and Inclusion hours across the organization-in 2017. Northern The Northern Trust Rotational Development reports directly to the Chief Executive Officer. Two Trust’s talent management team has developed Program is designed to build the technical skills, chief diversity and inclusion officers are responsible a customized training portfolio of core, manager, business acumen and leadership abilities of recent for the design and execution of topic-relevant sales and client servicing blended learning college graduates. Program members participate programs across the Americas, EMEA and APAC. solutions. In addition, Northern Trust launched in meaningful job rotations over an 18-month Northern Trust’s senior management team realizes a new three-day flagship mid-level manager period. On-the-job learning is supplemented and embeds our vision for diversity and inclusion program called the A Approach for Managers with additional development activities, including at all levels of our business. The Corporate Summit. Through this program, Northern Trust mentoring, leadership speakers, a book club, Governance Committee of the Board of Directors provides managers with targeted learning and community service events, a competitive business is responsible for providing oversight of our development opportunities. Training classes, case challenge and targeted training courses. diversity and inclusion policies, programs and guidebooks, articles, webinars and suggested The Northern Trust Enterprise Talent Leadership strategies. web pages are organized by leadership level Program aims to prepare high-performing mid- We strive to enhance the pipeline of women and and encompass a range of topics including team career employees for leadership success: development, results delivery, performance minority talent through an integrated strategy that management, emotional intelligence, agility and • Leadership assessment and self-awareness includes three key elements: key role development, productivity. We also offer external development • Career mapping and development planning talent acquisition and career progression.

Corporate Social Responsibility at Northern Trust 15 UK WOMEN IN FINANCE CHARTER Northern Trust pledges to promote In 2017, Northern Trust signed the UK The charter: gender diversity by: Women in Finance Charter and committed • Commits firms to supporting the • Designating one member of our senior to raise the ratio of women in the levels progression of women in to senior management team as responsible and of senior and executive vice president roles in the financial services sector by accountable for gender diversity and to at least 35 percent by 2020. This is a focusing on the executive pipeline and inclusion commitment by the UK’s HM Treasury and the mid-tier level signatory firms to work together to build a • Setting internal targets for gender more balanced and fair finance industry. • Recognises that firms will have diversity in our senior management team different starting points and that each • Publishing annual reports detailing our The charter reflects the UK government’s firm should set its own targets and progress toward achieving these targets aspiration to ensure gender balance implement a strategy appropriate for at all levels across financial services its organisation • Having an intention to ensure a link firms. A balanced workforce has positive between pay of the senior executive • Requires firms to publicly report on effects for customers, for profitability and team and delivery against these internal progress in order to support the for workplace culture, and is increasingly gender diversity targets attractive for investors. transparency and accountability needed to drive change

Northern Trust joined a group of more than increase diversity and foster inclusion within • Implement and expand unconscious 150 CEOs from some of the world’s leading their respective organizations and the larger bias education companies in signing the CEO Action for business community: • Share best known—and unsuccessful—actions Diversity & Inclusion™, the largest CEO-driven • Continue to cultivate workplaces that business commitment to advance diversity For more details please visit CEOAction.com support open dialogue on complex, and and inclusion in the workplace. Each signatory sometimes difficult, conversations about has committed to taking the following steps to diversity and inclusion

Corporate Social Responsibility at Northern Trust 16 GLOBAL DIVERSITY AND INCLUSION STRATEGY AND GOVERNANCE

Business Resource Councils ARD OF DIRECTOR Northern Trust believes in fostering an inclusive BO S environment where our employees’ unique mix of & INCLUSION LEA attributes and diversity of perspectives can serve SITY DERS VER HIP DI CO as catalysts for innovation. To help ensure our AL U M Y B N T O C A I L IL N commitments to diversity, inclusion and innovation S G R ADVANCING A E G OFESSIONAL E are embedded in the fabric of our company, IV PR S A NG L S M D I RESOURCE EA IA RK S D N E O IE OUNCIL B E Northern Trust sponsors 11 business resource R IL S C US RS N E W M ES R IN H I L A IN E ES E IP T L I F S RC O S C U C U S G councils (BRCs). These councils are employee- P U IL O R N B O C U C P S N N E R U E C R U I A O U O L initiated, governed and led, and are open to all O C P B U S C N P R B I I A E U L H C C P N N S E S S A S S S O O I Northern Trust employees around the globe who E C R N C D O R E L E U I I C U K M R D E I E N C L L N S I R S V O I U E D N O C S N C S E U O share an affinity for the strategic mission of the group. A H I W U R L U S T E E E S L E O S C L B R

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A B BT LAT N US SS N IN INE & business development across communities and RE ESS BUS E SO URC R C URCE ESO L S E OU R CI R demographic groups S NCIL COUN E O D U A R E • Serving as liaisons to prospective and C L E R S existing clients IO EM CIL N EA UN E DIVE CO S The BRCs also play a vital role in the recruitment, RSITY & INCLUSION retention and development of a globally diverse CO NG workforce and serve as an advocate on behalf of their RPORATE MARKETI constituencies, further enabling Northern Trust to be an employer of choice. Governance and Accountability Strategy and Oversight Tactics and Execution Stakeholders

Corporate Social Responsibility at Northern Trust 17 Human Rights and Workforce Principles COMPOSITION OF NORTHERN TRUST’S GLOBAL WORKFORCE* Northern Trust’s human rights and workforce principles apply to all global operations and Europe, Middle clearly state our support for the rights of Job Categories Asia-Pacific East, Africa North America Total minority groups, women and workers.

Our principles expressly reference our Permanent Full-Time 5,500 3,302 9,028 17,830 conformance with public policies including the Permanent Part-Time 5 256 112 373 International Labour Organization’s standards and the Organisation for Economic Co-operation Total 5,505 3,558 9,140 18,203 and Development’s guidelines for multinational enterprises. Employees worldwide also may *As of December 31, 2017. exercise freedom of association with regard to collective bargaining and trade agreements as permitted by applicable regional laws. WORKFORCE BY ETHNICITY AND GENDER** Two or Females We apply these standards to our suppliers Native More in Global and vendors as well as to our employees, who Job Categories White Black Hispanic Asian American Hawaiian Races Total Workforce receive training on antidiscrimination, diversity and inclusion and the prevention of sexual Exec/Sr Mgmt 303 19 15 12 1 0 2 352 155 harassment. We also provide training specifically on cultural change, which is especially helpful for Entry/Mid Mgmt 1,111 148 128 153 2 1 14 1,557 1,290 expatriates and employees serving short-term assignments abroad or experiencing global Professionals 4,332 843 807 671 6 18 101 6,778 6,509 relocation. A number of senior-level company Administrative 176 77 66 8 0 0 6 333 383 officers are responsible for overseeing the execution of our human rights and workforce Other 18 13 16 2 1 0 1 51 15 standards. Total 5,940 1,100 1,032 846 10 19 124 9,071 8,352 These standards commit us to providing fair and equal wages to employees regardless of gender and offering competitive compensation and **As of December 31, 2017. Ethnicity statistics include U.S. locations only. Gender statistics include all global benefits to our workforce. locations. All statistics include both permanent and temporary employees.

Corporate Social Responsibility at Northern Trust 18 MENTAL HEALTH EDUCATION IN LONDON

In conjunction with Northern Trust’s Global Other elements of the campaign include the Fund Services (GFS) group, our disability launch of an internal mental health site full of business resource council (DBRC) has advice and resources to support employees launched a program of support, awareness in need, and a Mental Health First Aid Training and education around mental health at work. program that has trained more than 100 Although one-in-four people in the UK will employees to date. This training has created experience mental ill-health, and sickness a network of Mental Health Champions absence due to mental health issues is rising, to support employees with a listening ear mental health is still a highly stigmatized and signposting. On World Mental Health subject. This discrepency poses a significant Day, more than 100 London Northern Trust problem to workplaces. employees attended a panel discussion that addressed key issues in mental health. The DBRC kicked off the initiative with an awareness-raising event in February 2017, By opening up the dialogue around mental in which a young man spoke about the health, the team is making it possible for experience of living with schizoaffective people to seek support at an early stage, and disorder. After attending the event, members hopefully avoid a long period of ill health. of the GFS leadership team were inspired to roll out a program of action within GFS that was later extended throughout Northern Trust. One of the most powerful aspects of the campaign are the “My Story” sessions, during which employees share their personal mental health stories with an audience of other Northern Trust employees.

Corporate Social Responsibility at Northern Trust 19 SHARED VALUE

Community engagement opportunities, paid of meeting space, catering, supplies and other the Community Reinvestment Act (CRA), time off for volunteerism and our matching gift knowledge services; and directorship guidance to approved the designation of The Northern programs provide a competitive advantage charitable and civic boards. Trust Company as a "wholesale bank." in employee recruiting and satisfaction. Our approach to supporting the community takes The wholesale designation allows us to Employee volunteerism is consistently a into account the way we influence our clients, concentrate efforts and resources on direct priority for college graduates considering shareholders, employees and the communities we investments that have a sustainable community future employers. Non-profit and civic board serve. We execute each activity with these priorities impact. Northern Trust carries an “outstanding” involvement is integral to talent management, in mind. Our scope of community involvement CRA rating, and new CRA investments totaling as it provides employees with leadership, skills provides sustainable company benefits: $512.6 million were originated in 2017. The development and networking opportunities Corporate Governance Committee of the Board Brand awareness – Our brand strength relies on beyond the scope of their responsibilities. of Directors receives an annual CRA and fair community sponsorships and alignment with highly Northern Trust Community Employees is a lending report and approves our policy related respected non-profit institutions. Our charitable global program that helps employees identify, to community reinvestment. As of December 31, grants, event sponsorships, charitable and civic engage and develop relationships with local 2017, the community investments portfolio totaled board representation and employee volunteerism charities. These relationships include financial $1.1 billion, and consisted of the following: and volunteer support. We offer two full days of are integral to our marketing strategy and serve to paid time off for employees to volunteer with help raise brand awareness and brand equity in our approved non-profit organizations. In addition target markets around the world. to these hours, employees generously gave over Business development – We work directly with 100,000 hours of their personal time in 2017 to CORPORATE each of our business units to identify community $ charitable organizations. PHILANTHROPY investment opportunities related to key marketing 19 Community involvement is deeply rooted in the and client relationship efforts. Given the MILLION PROGRAM IN AWARDS Northern Trust culture and affects the way we do philanthropic interests of our client base, community business globally. Since our founding in 1889, involvement has proven to be an effective business Northern Trust’s global corporate philanthropy Northern Trust has actively advanced a culture of development tool through which we can access key program awarded more than $19 million to caring and a commitment to invest responsibly clients, prospects and influencers. local and international civic and charitable in the communities we serve worldwide. This organizations in 2017. philosophy continues today through progressive Corporate Alignment community investments; contributions to service In October 2012, the Board of Governors and community organizations; employee of the Federal Reserve System, the federal volunteerism; gifts in-kind such as donations regulator responsible for monitoring

Corporate Social Responsibility at Northern Trust 20

$ EDUCATION AND $ AFFORDABLE NO MAN IS AN ISLAND: 100.7 967.1 MILLION INVESTMENT SOCIAL SERVICES MILLION INVESTMENT HOUSING Lending a Hand to Puerto Rico

In the wake of Hurricane Maria, which hit OBJECTIVE: Provide long-term capital and equity OBJECTIVE: Support the creation and retention Puerto Rico in September 2017 and left a for the development of community and education of affordable rental housing and affordable facilities such as charter schools, health clinics and homeownership in partnership with non-profit majority of the island without power, homes day care centers by non-profit partners. lenders and developers. and roads destroyed, and water contaminated, Northern Trust’s Latin Heritage Leadership COMMUNITY FACILITY: Northern Trust made Northern Trust continues our commitment Council (LHLC) partnered with other over $45 million in new fund commitments in to sustainable, affordable homeownership Chicago-area firms to provide help. 2017 for community development projects. For through continuing partnerships with Habitat for example, Northern Trust provided financing Humanity affiliates, investments in the Community Led by the LHLC, employees collected supplies for the new Eastside Community Center in Development Financial Institutions (CDFI) fund such as dry and canned foods, baby formula, Tacoma, Washington. This 55,000 square foot for affordable homeownership and purchases diapers, first-aid kits, towels and blankets, community center and aquatics center will serve of mortgage-backed security pools of home laundry detergent and pet food. They also the 44,000 local residents and will create 90 mortgages for low- and moderate-income raised money and purchased nearly 14,000 new permanent jobs and provide employment individuals. We also continue to own and service bottles of water to send to the island. training opportunities. mortgages originated through our affordable mortgage program for low- and moderate-income “The response was overwhelming. While I EDUCATION: In 2017 the community homebuyers and communities. know there is still much needed in Puerto Rico, development group provided funding for the expansion of programming to four Northern Trust invests in the development of it felt great to know that we, as an organization, underperforming Atlanta public schools to affordable rental housing through investments provided help,” said Luis Amaya, president improve the performance of 3,000 low-income in CDFI funds, pools secured by affordable of LHLC and manager of Commingled children from some of Atlanta’s most troubled rental housing developments, municipal bonds Investment Trust product management for neighborhoods. The Purpose Built Schools supporting affordable rental housing and equity in Northern Trust Asset Management. Atlanta instructional model includes an extended affordable rental housing developments through school day, full after-school program, early the Low Income Housing Tax Credit Program. learning programs and comprehensive support programming for parents and the community.

Corporate Social Responsibility at Northern Trust 21

$ $ 102.1 JOB CREATION 25.3 WEALTH SPOTLIGHT ON HEARTLAND MILLION INVESTMENT MILLION INVESTMENT ACCUMULATION HEALTH OUTREACH

OBJECTIVE: Support non-profit micro- OBJECTIVE: Make equity investments Northern Trust has financed the origination programs and the expansion of and certificates of deposits in community construction of Heartland Alliance businesses and job creation through private development banks to provide capital to Health’s new community health center equity funds. develop products and services to meet the located in the Englewood neighborhood Since 2012, Northern Trust’s community needs of the unbanked, underbanked and on Chicago’s south side. The full-service development investments have created underserved members of our communities. health center will provide much needed approximately 8,600 permanent, full-time jobs. In In 2017, Northern Trust provided secondary services such as primary care, counseling, 2017, Northern Trust invested in the Community capital to the Self-Help Federal Credit Union psychiatry, medical case management, Development Financial Institution People Fund’s through the Self-Help Ventures Fund, which health insurance assistance, HIV/AIDS revolving loan fund that provides financing and purchased a failed minority-owned financial care and linkage to housing. comprehensive technical assistance to minority-, institution in Chicago. The credit union’s mission This project was conducted by Northern women- and veteran-owned small businesses in is to address the growing problem of families lower income communities throughout Texas, increasingly using fringe and predatory financial Trust’s Community Development and including business reconstruction efforts after services instead of standard banking services. Investments group, which finances flooding in the Houston area. In addition, Northern It serves the full financial needs of its customers organizations and projects that Trust provided funding for the CDFI Georgia Cities and tests innovative products and delivery make a positive impact in the lives of Foundation to give low-cost, gap financing to small systems to better serve low-income, immigrant disadvantaged individuals and families. businesses revitalizing underserved downtown and minority families. It also supports communities by making areas in the state of Georgia. capital available through a variety of Northern Trust financed the construction of the innovative investment tools to create Denver Housing Authority’s new Collaborative sustainable change. In 2017, Northern Resource Facility that will house programs Trust provided nearly $2.9 million through assisting 14,000 low income households. The a combination of a direct debt investment facility will retain 135 permanent jobs, create and New Market Tax Credit Investments to 70 new permanent jobs and establish 150 assist with the construction of this project. construction jobs. In addition, the facility will have a dedicated space for job training classes and other social services.

Corporate Social Responsibility at Northern Trust 22 SUSTAINABLE INVESTING AT financial success of our clients and shareholders is NORTHERN TRUST dependent upon a healthy global environment, a NORTHERN TRUST MANAGED FUNDS stable society and well-functioning/well-governed The foundation of Northern Trust's responsible companies. We view the integration of environmental, Northern Trust Global Sustainability Fund investment principles is that we act in a manner to social and governance factors as being part of our protect our clients’ financial well-being. fiduciary heritage with a long-term focus. Northern Trust World Custom ESG Equity Fund Northern Trust offers investment capabilities with Northern Trust World Custom ESG EUR Hedged sustainable objectives in equity, fixed income and real Northern Trust ESG Funds Equity Index Fund assets. The approach and objective of a sustainable Northern Trust funds integrate or screen for a variety Northern Trust North America Equity investing strategy is multi-dimensional, and may of different ESG factors including United Nations Index UCITS Fund apply differently to different asset classes. While Global Compact principles, tobacco, weapons, Northern Trust Europe Equity Index Fund sustainability factors may be broad in nature, we firearms, gambling and nuclear weapons. As an focus on certain key issues and approaches in our asset manager, we also have the capability to: Northern Trust Emerging Markets Custom Low Carbon Optimised Equity Index Fund investment framework. • Manage assets to a socially responsible index. Our comprehensive Sustainable Investing Philosophy Northern Trust Emerging Markets Custom ESG We have partnerships with all of the leading Equity Index Fund encompasses responsible investing factors such index providers and can design additional as our bespoke ESG pooled fund policies, our ESG indices on behalf of clients. Northern Trust Emerging Markets Custom ESG engagement policy for our European index funds, Equity Index UCITS FGR Fund • Manage assets to a traditional index while corporate governance and internal engagement Northern Engage360 Fund excluding a client-directed list of companies. principles and our custom proxy voting policy with We currently manage restricted accounts to ESG guidelines. most major index series across asset classes. Northern Trust believes that, by serving as an active Accounts can be managed to replicate the risk owner on behalf of shareholders, we will help & return characteristics of the broad index or Northern Trust Asset Management is a portfolio companies produce sustainable value, the restricted index. signatory to the United Nations Principles and that companies' long- term financial returns are • Manage assets to a traditional index while for Responsible Investing (UNPRI), with connected to their strategic, environmental, social interpreting a client's Socially Responsible which we also partner on a variety of and governance performance. Sustainable investing Investing (SRI)/ESG guidelines. We currently is based on the philosophy that ESG analytics can working groups including equity, fixed manage a group of accounts for which complement quantitative or fundamental investment income, outreach and assurance. we interpret client guidelines and create techniques to mitigate risks or capture new a restricted list to synchronize with the opportunities. Our definition of sustainable investing investment management process. is based on the acknowledgement that the long-term

Corporate Social Responsibility at Northern Trust 23 At the end of 2017, Northern Trust asset During the first quarter of 2017, the proxy with a variety of groups within Northern Trust management managed $86 billion of assets analyst team, in coordination with the head Asset Management, including our quantitative globally that incorporated ESG criteria, including of environmental, social and governance research team and specialized portfolio managers. five ESG equity funds launched in 2017: the World investing, published Northern Trust’s Corporate In addition, Northern Trust Asset Management Custom ESG Minimum Volatility Equity Index fund, Governance and Engagement Principles. This has established a Sustainable Investing Council the Northern Trust Developed Real Estate ESG document outlines Northern Trust’s engagement in charge of affirming strategies to address Index fund, the Northern Trust Emerging Markets approach and priorities on topics such as sustainable investment issues and implementing ESG Leaders Equity Index fund, the Northern Trust board structure, executive compensation, risk the initiative at a corporate level. The Sustainable World ESG Leaders Equity Index fund and the oversight and environmental and social risks Investing Council is chaired by Northern Trust’s Northern Trust U.S. Quality ESG mutual fund. and opportunities. It aims to protect our clients’ director of product development and sustainable financial well-being throughout their investment investing and includes a diverse and representative Stewardship horizon. In our role as an active owner, we help group of members representing different parts of Engagement with management is a core part portfolio companies produce sustainable value our business. All members promote sustainable of the equity research process. Northern Trust’s and long-term financial returns. investing and represent various audiences such equity research analysts engage with hundreds of as CSR, product development and management, companies annually. Our focus is to accumulate Global Sustainable Investing Team equity, fixed income research, portfolio and interpret facts to reach sound investment management, business development, proxy voting Northern Trust has developed in-house, specialized conclusions with the aim of delivering positive long- and engagement. We believe that this structure expertise through our long-term commitment to term investment outcomes for clients. We employ contributes to a further enhancement of ESG within social, environmental and financial integrity. Our both quantitative and qualitative approaches and throughout our company. in this process. In addition to strategy, risk and sustainable investing team is responsible for ESG We also strongly believe in the importance of sustainability of financials, analysts also monitor research, innovation, product development and our leadership role and collaborative effort corporate governance, environmental and social product management across our array of asset in the industry. Members of the sustainable factors that are of material concern to the long- class capabilities. It proactively develops new ideas investing team have active roles in industry term sustainability of the investment. The proxy to ensure the centrality of sustainable investing associations and networks such as the Principles analyst team supplements the analysis performed thinking to our business development. for Responsible Investment (PRI), the investor by Northern Trust’s equity analyst team with This team works closely with our clients and advisory committee of the Sustainable additional research on corporate governance and our portfolio management team to develop Standards Board (SASB), the environmental and social matters that contribute to and implement sustainable investing strategies institutional investor group on Climate Change the long-term value of the investment and reflects ranging from simple negative screens to more and the Harvard Institutional Investor Forum. Northern Trust’s commitment to ESG issues. complex mandates, including thematic or active quantitative strategies. The team works closely

Corporate Social Responsibility at Northern Trust 24 SELECTED MEMBERSHIPS

THE UNITED NATIONS ENVIRONMENTAL PROGRAMME – FINANCE INITIATIVE (UNEP FI) The UNEP FI is a global partnership between UNEP and the financial sector. More than 200 institutions, including banks, insurers and fund managers, work with UNEP to understand the impacts of environmental and social considerations on financial performance. THE BOSTON COLLEGE CENTER FOR CORPORATE CITIZENSHIP (BCCCC) Based in the Carroll School of Management, the BCCCC was founded in 1985, inspired by an early recognition that community expectations of companies were changing. The center combines the most valuable aspects of a professional community with the resources of a leading academic institution. UNITED NATIONS PRINCIPLES FOR RESPONSIBLE INVESTING (UNPRI) The UNPRI Initiative is an international network of investors working together to put the six Principles for Responsible Investment into practice. Its goal is to understand the implications of sustainability for investors and support signatories to incorporate these issues into their investment decision-making and ownership practices. ASSOCIATION OF CORPORATE CITIZENSHIP PROFESSIONALS (ACCP) The ACCP is a membership organization open to for-profit companies or corporate funded foundations that have corporate responsibility or corporate citizenship programs. INSTITUTIONAL INVESTORS GROUP ON CLIMATE CHANGE (IIGCC) The IIGCC is a forum for investors to collaborate on climate change. It provides investors with a collaborative platform to encourage public policies, investment practices and corporate behaviors that address long-term risks and opportunities associated with climate change.

Corporate Social Responsibility at Northern Trust 25 © 2018 Northern Trust Corporation. Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A. Incorporated with in the U.S. Products and services provided by subsidiaries of Northern Trust Corporation may vary in different markets and are offered in accordance with local regulation. For legal and regulatory information about individual market offices, visit northerntrust.com/disclosures.

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