5-Globe Medalists by Category
These strong funds score well on Morningstar’s new Sustainability Rating.
One useful way of looking at the distribution of the new Morningstar Sustainability Ratings is by Morningstar Category. For people who are concerned about sustainability and also looking for a fund to fill a certain slot in their portfolio--say, a large-growth fund, or a mid-cap fund--the new ratings can be very helpful.
There are some limitations. For example, very few small-cap funds currently have Sustainability Ratings, because relatively few of their individual stock holdings are rated on environmental, social, and governance, or ESG, criteria by Sustainalytics. Only one domestic small-cap fund ( Invesco SmallCapValue (VSCAX)) has both a Morningstar Analyst Rating and a Sustainability Rating.
There are plenty of large- and mid-cap funds with Sustainability Ratings, though. For each of the six large-cap and mid-cap Morningstar Style Box categories, here are some U.S.-sold open-end funds that earn the top Sustainability Rating of High (5 globes), focusing on those that also earn Morningstar Analyst Ratings of Gold, Silver, or Bronze. This is not an exhaustive list, but it gives some idea of the types of funds that look good according to our sustainability criteria.
None of the large-value funds with a Gold rating also have the top Sustainability Rating, nor do most of the largest funds in the category. But a couple of Silver-rated funds with more than $10 billion do earn 5 globes: Vanguard Equity-Income (VEIPX) and Invesco Diversified Dividend (LCEAX). As their names imply, both of those funds focus on high-quality dividend-paying stocks, but the Vanguard fund is more diversified by sector, without the Invesco fund’s big weighting in consumer staples stocks.
The large-blend category contains numerous intentional ESG funds that get the highest Morningstar Sustainability Rating, including Parnassus Core Equity (PRBLX), TIAA-CREF Social Choice Equity (TISCX), Domini Social Equity (DSEFX), and Amana Income (AMANX), the latter of which has a religious focus but many similarities to secular ESG funds. (All of these funds except Domini Social Equity are Morningstar Medalists.) Among the medalists in this category that aren’t explicitly ESG-oriented but still earn a 5-globe Sustainability Rating are Gold-rated PRIMECAP Odyssey Stock (POSKX) and Silver-rated T. Rowe Price Dividend Growth (PRDGX).
The large-growth category also includes a few explicitly ESG funds with top Sustainability Ratings, such as Bronze-rated Neuberger Berman Socially Responsive (NBSRX) and Silver-rated Amana Growth (AMAGX), as well as several other prominent funds. These include Gold-rated Vanguard PRIMECAP (VPMCX) and the same team’s Vanguard PRIMECAP Core (VPCCX), Vanguard Capital Opportunity (VHCOX), and PRIMECAP Odyssey Growth (POGRX), all of which have big weightings in technology and healthcare, two sectors that are not as likely as some others to have ESG-related controversies. Silver-rated Jensen Quality Growth (JENSX) and ClearBridge Aggressive Growth (SHRAX), which also have significant healthcare exposure, also earn top Sustainability Ratings.
Among the mid-cap value funds that earn the top Sustainability Rating is the category’s biggest fund, the Silver-rated Fidelity Low-Priced Stock (FLPSX), managed by Joel Tillinghast. Although the fund is not explicitly ESG-oriented, Tillinghast focuses on small- and mid-cap stocks with good competitive positions and financial strength, especially consumer cyclicals and technology names, and he doesn’t hold many energy or industrial stocks. The other big name in this category with a top Sustainability Rating is Silver-rated American Century Mid Cap Value (ACMVX), which uses a broadly similar strategy but is more willing to hold energy and industrials.
The most prominent mid-cap blend fund with a 5-globe Morningstar Sustainability Rating is Silver-rated ASTON/Fairpointe Mid Cap (CHTTX), managed by Thyra Zerhusen and three comanagers. Its fairly concentrated portfolio is heavy in technology and media stocks, and has generally avoided companies involved in ESG-related controversies. That’s the only medalist in the category to earn the top Sustainability Rating; the only others to do so are two smaller Neutral-rated funds, Osterweis (OSTFX) and Invesco Mid Cap Core Equity (GTAGX).
The two biggest funds in the mid-cap growth category to earn High Sustainability Ratings are Gold-rated PRIMECAP Odyssey Aggressive Growth (POAGX), run by the same Primecap team we saw above, and Bronze-rated Janus Enterprise (JANEX), run by Brian Demain. The Janus fund has put together a solid long-term record with a portfolio that’s currently heavy in industrials, technology, and healthcare, but which has almost totally avoided energy and materials recently. Silver-rated Champlain Mid Cap (CIPMX), with a disciplined, quality-oriented strategy that focuses on a few sectors, including healthcare and technology, also earns a top Sustainability Rating.
David Kathman has a position in the following securities mentioned above: VPMCX. Find out about Morningstar’s editorial policies.
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