5 Medalists With 5-Globe Ratings and 'Intent'
For intentional ESG funds, the Sustainability Rating is a reality check.
Investors can use the Morningstar Sustainability Rating in a couple of ways. One is to identify a characteristic of a fund's portfolio: namely, how well its holdings score on a series of material environmental, social, and corporate governance, or ESG, metrics.
A company with good ESG scores is typically one that is managing the various ESG risks it faces, as well as opportunities that may arise from ESG issues, better than its peers. A fund with a Sustainability Rating of 5 globes is one whose overall holdings fare better on ESG metrics than those of 90% of its peers. It is an indicator to investors that a fund's underlying investments have strong sustainability characteristics. The Sustainability Rating allows investors to include sustainability alongside other criteria to evaluate funds.
Jon Hale does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.