Apple excluded from new Morningstar sustainability index series over supply chain issues

New sustainability offering unveiled with research partner Sustainalytics

Computer giant Apple is excluded from a new set of sustainability indices launched by fund research firm Morningstar due to labour and supply chain issues.

RI reported in July that the Chicago-based company was planning to launch an index series with its partner, ESG research house Sustainalytics.

At launch, Apple won’t be in the index family. The iPhone firm has “average scores on environmental and governance factors and is an underperformer on the social side,” says Matthew Gries, Director of New Product Development at Morningstar Indexes. “The issues relate to how Apple deals with some of its labour and supply chain issues.”

He contrasted Apple with Microsoft, which is included in the new index family — called the Morningstar Sustainability Index Series. Microsoft, Gries says, scores well relative to other software companies, especially on environmental and governance factors.

“Microsoft is a leader when it comes to reducing its carbon footprint. It takes data privacy and security seriously. Its board of directors is strong.” Gries’ comments come in a Q&A to accompany the index family launch.

“If you consider the US technology sector, Microsoft makes it into our ESG family, while Apple is excluded right now,” Gries said.His colleague, Head of Sustainability Research Jon Hale, said: “The industry needs reliable, independent indexes for research purposes.” He went on to say that with the growth in passive investing and ETFs “there’s clearly appetite for more on the ESG side”.

“Apple is excluded right now”

Gries concurred, saying there was “no reason” that ESG investors shouldn’t be able to also access a source of investment return in a “low-cost, low-turnover, transparent, and systematic” format.” The index series is built using proprietary Morningstar research and company-level information from Sustainalytics.

The 27-strrong series encompasses broad regional offerings such as Global Markets, Asia and so on along with developed markets, emerging markets and single country indices. The indices are “very much aligned” with Morningstar’s new sustainability ratings for funds. The firm uses a best-in-class approach for the broad ESG benchmark series, which means an oil company scoring better than its peers “will find its way into the index”. Alcohol is in, as it is not seen as being inherently harmful, if used as directed. But the indices exclude makers of cluster munitions and biological weapons. Link