US fund rating giant Morningstar has today (March 1) introduced the sustainability rating of funds that was heralded by its agreement with environmental, social and governance (ESG) research house Sustainalytics last year.
Morningstar said its new Morningstar Sustainability Rating would enable investors globally to evaluate both mutual funds and exchange-traded funds based on how well the companies held in their funds are managing their ESG risks and opportunities.
Morningstar is rolling out the ratings and related ESG metrics for around 20,000 funds via Morningstar Direct, its platform for asset managers and wealth management professionals, and Morningstar Office, its offering for independent financial advisors. In the coming weeks, the Nasdaq-listed firm will launch the ratings on other platforms as well.
RI reported in August 2015 that Swiss private banking group Julius Baer would be the first Morningstar client to license the ESG scores for its fund research team.Steven Smit, CEO of Morningstar Benelux, has been named head of sustainability and will be responsible for leading the initiative. Jon Hale, former head of manager research for North America, has been named head of sustainability research.
Smit said: “Our Sustainability Rating and related metrics will provide investors with an ESG lens they can use to evaluate funds and, eventually, other managed products.
“This initiative will help us better serve investors who place particular importance on incorporating ESG factors into their investment decisions.”
Morningstar says its initial analysis reveals that funds with explicit sustainable or responsible mandates are “generally practicing what they preach”.
Nearly two out of three such funds received the highest ratings, more than double the percentage of funds with Sustainability Ratings overall. It’s important to note, the firm said, that funds with explicit sustainable or responsible investment mandates comprise just 2% of the fund universe. Link