Morningstar to score funds’ environmental, social, and governance impacts

By Staff | August 14, 2015 | Last updated on August 14, 2015
1 min read

Morningstar plans to start scoring global mutual funds and ETFs by environmental, social, and governance (ESG) factors later this year.

Morningstar will base its scores on ratings from Sustainalytics. Sustainalytics analysts focus on the relevant ESG issues within industries and markets, assigning each company about 70 indicator-level scores related to environmental impact, social practices, and governance policies and procedures.

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In a survey released in February, the Morgan Stanley Institute for Sustainable Investing found 71% of individual investors are interested in sustainable investing. In the past year, the number of financial institutions signed on to the Principles for Responsible Investing increased 29%, to more than 1,300 firms.

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Using its comprehensive portfolio holdings data, Morningstar will create asset-weighted composite ESG fund scores based on company-level Sustainalytics ESG ratings. For the first time, investors will be able to compare funds across categories, relative to benchmarks, and over time using ESG factors.

Morningstar expects to launch the fund-level ESG scores in the fourth quarter of 2015 and through Morningstar Data feeds and its major software platforms in 2016.

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The staff of have been covering news for financial advisors since 1998.