Asset managers are making progress on their commitment to ESG factors, but few earn the highest marks, according to Morningstar's latest ESG Commitment Level Landscape report published Feb. 2.
Hortense Bioy, global director of sustainability research for Morningstar, said in a news release about the report that many firms have improved their environmental, social and governance practices, and raised the bar for the industry overall. Still, she cautioned that investors focused on sustainability "more than ever" should scrutinize asset managers' ESG integration practices, resources and active ownership activities.
"We can see improvements for most managers we reviewed in the past year," Bioy said in an interview. "They are putting in more resources, more people, they've had time to update their systems. We see improvement across the board."
Morningstar's qualitative rating, first introduced in 2020, assesses how asset managers incorporate ESG factors into their investment processes and deliver sustainability outcomes relative to their peers. Managers earn rankings of leader, advanced, basic and low based on three measurements: philosophy and process, resources, and active ownership. Of 97 firms reviewed, 42 are in the U.S., 22 in the U.K., 18 in Australia, 12 in Europe, and one each in Finland, Canada and Singapore.
Just 8% of them are rated as leaders when it comes to ESG commitment levels: Robeco, Impax Asset Management, Parnassus Investments, Australian Ethical, Boston Trust Walden, Domini Impact Investments, Affirmative Investment Management, and Stewart Investors. Another 24% were rated as advanced, 45% as basic and 23% as low.
Morningstar noted that most of the leading firms have focused on sustainable investing "since day one, and this philosophy remains core to their identities today," which include an organizationwide belief that sustainability goals are part of long-term financial return. "Over the years, these firms have not rested on their laurels," the report said.
The 2024 report highlights 12 asset managers, five of whom were upgraded: Comgest, Fidelity International, Pictet Group, Janus Henderson Investors and Man Group. Morningstar also added Nordea, ranking it at the advanced level. The latest report shows roughly one-third of the 97 managers considered as advanced or leaders in ESG commitment.
