Morningstar plans to launch the world’s first ESG scores for global mutual funds and exchange-traded funds, using ESG company ratings from industry research firm Sustainalytics.
Morningstar will use its data on fund portfolios and the individual company ESG scores from Sustainalytics to create asset-weighted composite scores for each fund, the company says in a press release. It says it will launch the fund scores in the fourth quarter of this year and supply them to its feeds and major software platforms next year.
The scoring system will allow investors to compare funds throughout various categories and allow them to drill down to see the funds’ scores of each of the three ESG pillars – environment, governance and social – Morningstar says. They will also be able to track the evolution of the funds’ ESG scores over time.
Julius Baer will be the scoring system’s first client, licensing it for use by its fund research team, according to Morningstar.
‘Providing fund scores on ESG factors is a natural extension of our work,’ Jon Hale, Morningstar’s director of manager research for North America, says in the press release. ‘We want to bring even greater transparency and accountability to the investment industry with ESG research, data, and tools, while helping investors to put their money to work in ways that are meaningful to them.’
With the fund scores, the firm aims to tap a market that it sees as growing rapidly. In announcing the scores, it referenced a study by the Morgan Stanley Institute for Sustainable Investing that found 71 percent of individual investors are interested in sustainable investing. It also cites the rapid growth of the UN-backed Principles for Responsible Investment, which expanded its base of institutional investor members by 29 percent in the past year.
Sustainalytics ESG provides ratings on more than 4,500 companies, using 70 indicator-level scores related to environmental impact, social practices, and governance policies and procedures. Morningstar, meanwhile, tracks the holdings of more than 200,000 global managed products.
