Provider of independent investment research, Morningstar, Inc., today announced plans to launch the first environmental, social and governance (ESG) scores for global mutual and exchange-traded funds in the industry.
The company, with branches here in Luxembourg, will draw on ESG company ratings from Sustainalytics, an ESG and corporate governance ratings and research provider, in order to determine the scores. Julius Baer, a Swiss private banking group, will reportedly be the first client to license the ESG scores for its fund research team.
The decision to develop this scoring system was borne from an increasing importance of ESG policies and practice, as emphasised by investors and the financial services industry. Jon Hale, Morningstar's director of manager research, North America, stated: "One of Morningstar's core values is 'investors first'. As part of our mission of helping investor reach their financial goals, we have a long tradition of innovative research centered on good stewardship, lower costs and more transparency for investors."
The Morgan Stanley Institute for Sustainable Investing found in a February study that 71% of individual investors have shown interest in sustainable investing, with a 29% increase in the number of financial institutions that signed the UN-supported Principles for Responsible Investment (PRI) Initiative in the past year alone. Morningstar reported that more than 1,300 firms, managing in excess of $59 trillion, currently form part of this global investors' network aimed at promoting reponsible investment.
"Providing fund scores on environmental, social, and governance factors is a natural extension of our work," continued Jon Hale. "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."
The collaboration with Sustainalytics contributed over 20 years experience in ESG research and analysis to the project. Morningstar tracks the holdings of more than 200,000 global managed products, whilst Sustainalytics provides ESG ratings on some 4,500 companies. Morningstar stated with the partnership investors would be able to compare funds cross-categorically, whilst also being able to access specific scores for each of the three elements of Environmental, Social and Governance.
"ESG considerations, once viewed from the sidelines, are increasingly front and center for fund investors," explained Michael Jantzi, chief executive officer of Sustainalytics. "We applaud Morningstar for its innovation and look forward to working together to create a new standard for fund benchmarking."
Morningstar reported that it expects to launch the ESG scores in Q4 of 2015, making them available on its Data feeds and major software platforms in 2016.
