This month, we are enhancing the Morningstar Sustainability Rating by expanding the number of portfolios that contribute to a fund's Sustainability Score and by using the broader Morningstar Global Category system as the peer group for assigning a fund's Sustainability Rating. We believe these enhancements make the rating a more reliable measure of the extent to which a fund incorporates sustainability factors in its security selection and portfolio construction.
The Morningstar Sustainability Rating is designed to give investors a way to assess the sustainability profile of the holdings in a fund's portfolio relative to a fund's peer group. To make that assessment, we use Sustainalytics' company ESG ratings, which evaluate the material environmental, social, and corporate governance-related risks and opportunities that a company faces. Company ESG scores are rolled up on an asset-weighted basis to get a Portfolio Sustainability Score, and a Sustainability Rating is assigned based on where that score ranks among a fund's peers, using a normal distribution.