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Rating:M* Adds Another Score For Mutual Funds Not Rated 0.0 Email Routing List Email & Route  Print Print
Tuesday, August 18, 2015

M* Adds Another Score For Mutual Funds

News summary by MFWire's editors

Fundsters, beware; the folks at Morningstar are about to start scoring your wares in another way.

Last week the Chicago-based mutual fund ratings specialists unveiled plans to launch ESG (environmental, social, and governance) scores for mutual funds worldwide. The Financial Times and InvestmentNews both picked up on M*'s plans.

By teaming up with Dutch firm Sustainalytics, Morningstar will add ESG scores onto each mutual fund. Sustainalytics rates companies from zero to 100 based on ESG impact, and the Morningstar folks will weight the underlying components' scores to arrive at overall ESG ratings for each fund. This will be separate from, and in addition to, its quantitative, risk-adjusted-performance-based star ratings, and its forward-looking, qualitative analyst ratings.

"We want to bring even greater transparency and accountability to the investment industry with ESG research, data and tools, while helping investors to put their money to works in ways that are meaningful to them," states Jon Hale, director of manager research in North America for Morningstar.

A subset of mutual funds actively use some kind of ESG screens, but these scores will be applied to non-ESG funds, too. For ESG-focused mutual fund shops, the scores may be a double-edged sword. On the one hand, they'll gain numbers to point to show how their wares compare favorably to specific non-ESG-focused funds. On the other, it may create "new" competing ESG-like funds if any high-performing funds without specific ESG screens turn out to have strong ESG scores anyway. 

Edited by: Neil Anderson, Managing Editor


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