ESG Investing Gets Boost from New Scoring System

Aug 20, 2015 4:00 PM ET

ESG Investing Gets Boost from New Scoring System


The fast-moving trend to integrate ESG factors into investment decision-making just took another sharp turn upward. Morningstar, a research firm that tracks the holdings of 200,000 global managed financial products, will launch the first ESG scores for global mutual and exchange-traded funds later this year. The scores will be based on ESG ratings from Sustainalytics, a provider of ESG ratings and research on more than 4,000 companies. For the first time, investors will be able to compare funds across categories, over time, using new standards for benchmarking mutual funds and ETFS against ESG factors globally.

How will this work? Morningstar will create asset-weighted composite ESG fund scores based on Sustainalytics’s company-level ESG ratings. This new program should substantially increase the already fast-growing amount of investment dollars flowing into responsible investment, now pegged at $59 trillion. A recent study by the Morgan Stanley Institute for Sustainable Investing found that 71 percent of individual investors are interested in sustainable investing. This development is the latest evidence that ESG issues are moving into mainstream investment practice.

I’m John Howell for 3BL Media.

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