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Technology & Data

Sustainalytics Enhances ESG Risk Ratings

Morningstar Sustainalytics has upgraded the corporate governance methodology of its ESG Risk Ratings as part of a “significant” enhancement initiative. The move responds to the increased importance of corporate governance reported in the firm’s second annual Voice of the Asset Owner Survey. According to the study of 500 asset owners globally, 67% of respondents said ESG has become more material to investment policy in the past five years. Sustainalytics will also strengthen its material ESG risk measures in the coming months, introducing new measures for raw materials use and water, also expanding the data privacy and cybersecurity measures which underpin the ESG risk ratings methodology. The enhanced thematic research will be implemented on a company-by-company, rolling basis as rated companies go through their regular review cycle. It is expected that all companies in the coverage universe will complete this process by September 2024. “Our ESG Risk Ratings help investors identify company exposure to industry-level ESG risks and how effectively companies are managing that exposure,” said Laura Lutton, Director of ESG Product Management at Morningstar Sustainalytics. “The world is constantly changing, creating a challenging environment for investors, and our ESG risk metrics need to evolve along with it. These enhancements represent the most significant change to our methodology since we introduced our flagship ESG Risk Ratings to investors in 2018.”

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