Morningstar

Morningstar ESG Commitment Level

The Morningstar ESG Commitment Level is a qualitative assessment that aims to help investors identify the asset managers dedicated to delivering sustainability outcomes. In this report, we share our analysis of 108 asset managers around the world, nearly half of which have been reviewed so far in 2023.

Over the past few years, environmental, social and governance issues such as climate change have become more prominent. As a result, investors increasingly expect asset managers to minimize these risks to their portfolios and address the impact of their investments on society and the planet. In response, asset managers have ramped up their ESG capabilities and investment offerings.

More than ever, sustainability-focused investors should be discerning when selecting managers. With tremendous growth in sustainable investing has come increased choice, and today there is a fund to suit each investor’s preferences. Concerns about greenwashing have also proliferated, and buying an ESG- focused or sustainable fund without doing proper due diligence on the provider could lead to disappointing results. The Morningstar ESG Commitment Level helps sustainability-focused investors assess a fund manager’s alignment to their own values by providing insights into firms’ sustainable- investing philosophies, ESG integration processes, specialist resources, and stewardship activities.
 

Key Takeaways
 

• Out of the 108 asset managers evaluated, eight earn a Morningstar ESG Commitment Level of Leader, while 21 score Advanced. The largest group of firms—48—receive an ESG Commitment Level of Basic, and 31 earn Low. This distribution reflects the variety of the marketplace, which includes large, diversified asset managers as well as sustainability-focused firms.
   
• In this fourth installment of the ESG Commitment Level landscape, 15 firms were new additions to coverage, and 34 firms were reviewed for the second or third time. Of those, five saw ratings changes.
   
• Ratings changes picked up compared with previous years but remained few and far between. Two firms (Wellington Management and Brown Advisory) were upgraded to Advanced from Basic. Two firms (Franklin Templeton and Betashares) were upgraded to Basic from Low. One firm (UBS Asset Management) was downgraded to Basic from Advanced.
   
• The three largest index-fund managers, namely BlackRock, Vanguard, and State Street, are constrained in their ability to lead on sustainability matters in part because most of their assets track non-ESG indexes. BlackRock and State Street earn Basic, while Vanguard earns Low.
   

Please refer to the following tags added to asset manager's profiles on ESG.Guide:
 

Morningstar ESG Commitment Level - Advanced

Morningstar ESG Commitment Level - Leader

Morningstar ESG Commitment Level - Basic

Morningstar ESG Commitment Level - Low

For more information on the Morningstar ESG Commitment Level please also refer to the following article on investESG.