ESG Investor’s weekly round-up of news on technology and tools in the sustainable investing sector.
Investment research and data provider Morningstar has begun formally integrating ESG factors into its analysis of stocks, funds and asset managers, implementing the Sustainalytics ESG Risk Ratings technological framework. This will measure a company’s exposure to material ESG risks using a one- to five-star rating. Analysts will pair this with qualitative research focused on examining the extent to which strategies and asset managers are incorporating ESG factors. Asset managers will be ranked on a four-point scale: Leader; Advanced; Basic; and Low. In a webinar discussing the changes, director of sustainability research, EMEA and APAC, Hortense Bioy, said Morningstar aims to provide more context around quantitative data with these enhancements to its framework. “Many investors feel confused about the claims they hear and read in sales materials,” she said. “It has become harder for investors to separate funds and assets managers that truly focus on sustainable investing from those that incorporate ESG factors in a more limited way.”
Separately, Sustainalytics has launched 40 impact metrics designed to help investors more closely monitor, measure and report on the social and environmental impact of their portfolios. Covering more than 12,000 companies, the metrics allow investors to choose specific impact themes and UN Sustainable Development Goals (SDGs) to align investment strategies. The Sustainalytics impact framework covers six impact themes corresponding to one or more SDGs, and comprises of two social areas, and three environmental areas. This framework can be adapted for various sustainability, impact of disclosure approaches. “With our Impact Metrics, we offer a structured set of product and operational metrics backed by a transparent framework that enables investors to understand, monitor, and show the impact of what companies produce and how they conduct their business,” said Megan Wallingford, associate director of product strategy and development at Sustainalytics.
Index provider S&P Dow Jones has announced the results of its annual Dow Jones Sustainability Indices (DJSI) rebalancing and reconstitution. The DJSI indices measure the performance of companies selected with ESG criteria, and are comprised of corporate leaders in global sustainability, and represents the top 10% of the largest 2,500 companies in the S&P Global Broad Market Index based on long-term economic and ESG factors. Following this year’s review, Humana, Ecolab, and Fast Retailing have been added to the index, with Alphabet, Bank of America and United Parcel Service removed. Using Corporate Sustainability Assessment data, more than 7,300 companies complete the assessment, with a record 19% increase in completion in 2020.