Investment research and analytics giant Morningstar has fully integrated environmental, social and governance (ESG) data into its processes, it announced last week.
It follows Morningstar’s acquisition of ESG data specialist Sustainalytics earlier this year in a deal initially worth €55 million ($65 million).
The company’s manager ratings staff will “assess the analytics and personnel committed to each strategy and the extent to which the strategy incorporates those resources into the investment process”, Morningstar said.
This would involve judgements on how clearly each manager articulates their ESG philosophy and process, and how these approaches have influenced its investment decisions and corporate culture.
“Investors are expressing their investment objectives in more-encompassing terms than ever before, and they’re putting their money where their mouth is,” said Haywood Kelly, Morningstar’s head of research.
“For companies, evaluating ESG risk is a business imperative to both meet diverse stakeholder needs and mitigate potential legal, operational, or reputational risks. Morningstar’s equity and manager research teams aim to address these trends and empower investors through long-term, methodological research approaches, bolstered by qualitative analysis and independent thinking.”
Hortense Bioy, director of sustainability research for Morningstar, added: “In an increasingly confusing area of investing with different approaches, standards, disclosures, and more, the ESG Commitment Level will help investors discern funds and asset managers that truly focus on sustainable investing from those that incorporate ESG factors but in a limited way.”
Equity analysts at Morningstar will use Sustainalytics’ established ESG risk ratings, which measure companies’ exposure to a range of risks related to societal issues, the environment, and governance standards.
The research company said these ratings would “inform Morningstar’s assessment of a stock’s intrinsic value and the margin of safety required” before assigning a rating.
Separately, German asset manager DWS has pledged to become a carbon-neutral company “in line with the Paris Agreement – and well ahead of the timeline officially set out in the agreement”.
CEO Asoka Woehrmann said at the company’s annual general meeting last week that DWS was “committed to becoming climate-neutral in its actions”.
“This will not happen overnight, but will only succeed in close and ongoing dialogue and exchange with clients, regulators and stakeholders,” he added.
“It is also clear that our definition of sustainability encompasses more than just climate action; it includes topics of good corporate governance and social justice. However, tackling climate change is a collective task for this generation, and one to which we are happy to commit ourselves. This is also because we believe in growth potential for DWS and because we want to be a leader among asset managers in the field of ESG.”
DWS, which is majority owned by Deutsche Bank, has €759 billion in assets under management across its global operations.