| Morningstar Sustainability Ratings – How they work |
Morningstar explains: “The Sustainability Rating calculation is a two-step process. First, each fund with at least 50 per cent of assets covered by a company-level ESG [environmental, social or governance] score from Sustainalytics receives a portfolio sustainability score. “This score is an asset-weighted average of normalised company-level ESG scores with deductions made for companies involved in controversial incidents, such as environmental accidents, fraud, or discriminatory behaviour. Article continues after advert “The Morningstar Sustainability Rating is the portfolio sustainability score relative to at least 10 category peers, assigned in a bell curve distribution. Funds receive Sustainability Ratings described as low, below average, average, above average and high, and depicted by globe icons where low equals one globe and high is five globes.” Morningstar updates the Sustainability Rating each month using the most recent portfolio sustainability scores. |
Mirova chief executive Philippe Zaouati adds that recent developments have resulted in the responsible or sustainable investment approach becoming more “concrete”.
He says: “Responsible investing is becoming more mainstream. I don’t like this word as it is sometimes a way of accepting a dilution of the concept. But actually it is the contrary, it is more concrete and stronger than before.”
Mr Zaouati notes that while the trend from the old economy to the new low-carbon economy was in motion, the agreement at COP21 “shows this trend is not going to stop. This is the most important thing for investors, they have to take into account this trend is here to stay”.
But John David, head of Rathbone Greenbank Investments, points out that while the Paris Agreement “was a watershed moment in achieving coordinated global action, there is still significant uncertainty as to how it will unfold at the national level”.
Nyree Stewart is features editor at Investment Adviser
