On March 1st Morningstar announced the release of new Sustainability Ratings for 20,000 mutual and exchange traded funds globally including equity, fixed income and possibly cash equivalent funds.
These ratings represent a marketing opportunity for many advisors, asset managers and plan providers.
Sustainability Ratings – Why should you care?
While many advisors, asset managers and plan providers have resisted a growing trend in sociably responsible investing, the tide is starting to shift. Institutional assets under management for Environment, Social and Governance products, or ESG for short, have increased from $639 billion in 1995, to $3.7 trillion in 2012, to $6.5 trillion in 2014 according to The Forum for Sustainable and Responsible Investment and Envestnet PMC. Although mutual fund assets are much more modest – $135 billion in 150 funds in 2016 – advisors are reporting that more and more clients are clamoring for ESG investments, and many plan sponsors, especially for mega and large plans are already pushing for ESG screening. Major asset managers such as Black Rock and Goldman Sachs have launched ESG funds in the last year and Department of Labor affirmed in October that sociably responsible investing is a legitimate criteria for fiduciaries in evaluating a fund’s suitability for an investment lineup – ESG is going mainstream.
What are the Morningstar Sustainability Ratings?
The Sustainability Ratings are a scoring system to help investors to evaluate funds based on the increasingly popular ESG criteria that are an outgrowth of the Sociably Responsible Investing movement (SRI). The Sustainability Rating uses the same concept as the star system, but with globes.
Source: all images sourced from Morningstar YouTube video
Morningstar aggregates sustainability scores for each company in a fund, sourced from Sustainalytics, a leading provider of sustainability scores, based upon three sustainability pillars – Environment, Social and Governance. The scores for the three pillars are aggregated to give an overall portfolio score.
Funds will be scored relative to each other within the same Morningstar Category, and fund comparisons and category averages should be possible.
Marketing Opportunity – How can Fluent can help?
Our information management and presentation technology supports all aspects of sales and product marketing to the client/advisor.
We can support integrating ESG information and Morningstar Sustainability ratings into:
- presentations, documents and reports
- both preset and ad hoc
- with appropriate compliance fences and disclosures
- and with flexible templates for exhibit switching or incorporating new information
- dynamic fund comparison & visualization tools that incorporate ESG filters
- output in attractive format
- or viewable online through responsive web design on mobile devices
- digital distribution to websites and plan and advisor portals
- data extracts and widgets
- output to:
- fact sheets, performance reports, fund commentaries, pitch books, presentations
- fund monitoring reports, fund lineup proposals, plan reviews
Contact – To discuss how Fluent can support your needs, please contact us at firstname.lastname@example.org.
- Morningstar press release
- Morningstar ESG handbook and methodology
- Investment News article Socially Responsible Investing is Coming of Age (free registration may be required)
What are your thoughts on this new trend?
Director of Market Research and Product Management
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