Morningstar's sustainability effort kicks off with ESG scores on 20,000 funds
Morningstar Inc. on Tuesday rolled out its first batch of mutual funds scored with sustainable-investing grades related to environmental, social and corporate governance screens applied to the underlying securities in each fund.
The fund-tracking firm, through a partnership with ESG researcher Sustainalytics, launched its new program with ESG scores on 20,000 funds globally.
The ESG scoring system, which was first announced in August, will apply scores at both the fund and category levels.
The scores are initially available in Morningstar DirectSM, the company's research platform for asset managers and wealth management professionals, and Morningstar OfficeSM, the practice management system for independent financial advisers.
In the coming weeks, the company plans to launch the ratings on other platforms, including Morningstar Advisor WorkstationSM and Morningstar.com.
Funds will receive scores based on the ESG metrics applied to their underlying holdings, and at least 50% of a fund's underlying holdings need to be scored in order for the fund to receive an ESG score, according to Jon Hale, head of sustainability research at Morningstar.
“Many investors are interested in sustainable investing but unsure how to put it into practice,” Mr. Hale said. “Some firms say that they invest according to sustainability principles, but it's been hard to verify. Now investors can draw their own conclusions.”
According to the latest data from U.S. SIF, there is nearly $7 trillion investing in ESG strategies in the U.S., which is up from $4.3 trillion in 2014, and up from $202 billion in 2007.