Environmental, social and governance (ESG) scores for mutual funds are set to be launched soon by Morningstar, a first for the industry. Morningstar expects to roll out the fund-level ESG scores in the fourth quarter of 2015 and through Morningstar Data feeds and its major software platforms in 2016.
“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.” said Jon Hale, Morningstar’s director of manager research, North America, in a statement.
Morningstar will base the scores on ESG company ratings from Sustainalytics, which has been a provider of ESG and corporate governance ratings and research for more than 20 years. Sustainalytics’ analysts focus on the relevant ESG issues within industries and across markets, assigning each company under coverage approximately 70 indicator-level scores related to environmental impact, social practices and governance policies and procedures.
The firm provides ESG ratings on more than 4,500 companies. Morningstar, which tracks the holdings of more than 200,000 global managed products, will use Sustainalytics’ ESG ratings in combination with its own comprehensive portfolio holdings data to create asset-weighted composite ESG fund scores.
For the first time, Morningstar says investors will be able to use ESG factors to compare global funds across categories, relative to benchmarks and over time. They will also be able to see scores for each of the three — Environmental, Social and Governance — pillars.