Financial advisers will be able to use Morningstar’s Sustainability Rating system to evaluate funds based on environmental, social, and governance (ESG) factors.
The sustainability-focused rating system, launched yesterday, was developed to meet the demands of investors, who have been focusing on ESG risks and opportunities when making investment decisions.
The international research house has appointed Steven Smit, chief executive of Morningstar Benelux, as head of sustainability, while former Morningstar head of manager research North America, Jon Hale, has been appointed as head of sustainability research.
“Given the widespread and growing interest in sustainable investing around the world, investors need better tools to help them determine whether the funds they own or are considering adding to their portfolios reflect best sustainability practices,” 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.
“Creating more insight into sustainability investing is a passion of mine and many others at Morningstar.
“This initiative will help us better serve investors who place particular importance on incorporating ESG factors into their investment decisions.”
Hale said the new rating system would make it easier for investors to make decisions based on ESG factors.
“In that way, investors can better determine how to incorporate sustainable investing into their portfolios, or assess the extent to which their fund investments are upholding best sustainability practices,” he 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, using an independent, robust check of that claim that’s based on comprehensive analysis of a fund’s holdings.”
