Morningstar signed the U.N. Global Compact (UNGC) in 2021, committing the firm to aligning our business strategy and operations with the U.N.’s 10 universal principles and advancing the U.N.’s Sustainable Development Goals.
In June, Morningstar CEO Kunal Kapoor sat down to discuss the firm’s UNGC membership and how we support the UNGC’s core principles.
Q: Why join the U.N. Global Compact?
Kunal Kapoor: Many of the UNGC’s principles and goals naturally align with Morningstar’s efforts to make sustainability data and information clear and accessible for a wide range of audiences. Our UNGC membership helps orient our internal business practices with the kinds of outcomes that many of our stakeholders indicate they support. And, of course, when we join other firms in this global agreement, it helps all of us move the needle on the critical sustainability issues the world is facing.
Our membership is also consistent with who we are as a firm: Morningstar recently added ‘Sustainable Responsibility’ to our core values, reflecting our firm-wide focus on driving transparency and access to ESG data, which we know will contribute to a more just and equitable global economy. We see the UNGC as similarly committed to transparency and progress; for example, the UNGC’s new annual reporting requirements for member organizations is laser-focused on consistent, comparable, and measurable progress. The progress report is designed to support informed stakeholder decision-making and hold the reporting firm accountable.
Of course, our participation in the UNGC is consistent with Morningstar’s key product offerings, too. Our research and ratings are designed to help investors understand the ESG risk in their portfolios; increasingly, our efforts are focused on helping investors understand the extent to which their investments align with international standards on human rights, for example, or a decarbonizing economy. This kind of connection between our mission, our product offerings, and the UNGC’s core principles makes the agreement a natural fit for Morningstar. We’re excited because we think this membership will help inform our business strategy, hold us accountable, and increase our firm’s value over the long term.
Q: Our firm is focused on five of the Sustainable Development Goals (SDGs): Why these five? Why not all? And what does that alignment mean?
Kunal Kapoor: We’re disciplined about focusing our efforts—no firm can be all things to all people. So, we’re careful to focus our efforts on five specific goals that relate to our firm’s core competencies.
In 2020, we reviewed our materiality assessment, which helped us understand the sustainability topics most likely to impact our business performance and the topics most important to our stakeholders.
Given this assessment, we have aligned our sustainability efforts to the SDGs focused on: Gender Equality, Decent Work and Economic Growth, Reduced Inequalities, Responsible Consumption and Production, and Climate Action. These specific SDGs will guide our sustainability strategy moving forward, and we will be implementing time-bound goals related to these focus areas.
Q: What excites you the most about sustainability efforts at Morningstar?
Kunal Kapoor: I’m actually very excited about what’s happening in the industry generally—and what’s happening at Morningstar. First, I see an effort from a lot of organizations like ours to earnestly grapple with a changing landscape and increased expectations from investors, employees, and other stakeholders. I see sustainability data getting more robust and more widely understood, and I see investors and policy makers building knowledge in the space. I believe better data, increased transparency, and a deeper understanding is going to be good for all of us.
At Morningstar, we’re continuing to build tools and research to help investors of all kinds make more informed decisions. Right now, for example, we’re enhancing our impact-focused dataset focused on the U.N.’s Sustainable Development Goals. We’ve recently expanded the coverage of our Morningstar Sustainability Rating for Funds. These offerings are designed to help investors understand the sustainability of their investments.
We’re also focused on partnerships with organizations that can help move the needle. For example, we became a founding member in the Net Zero Financial Service Providers Alliance committing us to articulate a path to reducing our environmental impact.
Overall, I’m proud of Morningstar’s effort to draw on our independent research to identify best practices and implement them across our business. It’s a journey— and we’re learning a lot along the way! This year, we released data on our global gender pay gap—which led to a step-up in compensation spending to close the areas in which we saw a gap. We also established a clear, concise measurement approach to data privacy and information security disclosure, an increasingly important topic in the finance sector. We made that methodology transparent – and maybe we’ll see the industry follow suit! I’m excited to see the firm holding ourselves accountable to measurable progress and routinely asking ourselves the same questions our analysts pose to outside management.
As a member of the UNGC, Morningstar publishes an annual Communication on Progress detailing our progress towards advancing the principles of the UNGC and its goals.
You can find our first Communication on Progress as a part of the UNGC’s new Early Adopter Program, here. You can also visit our 2021 Enterprise Sustainability Report to dive into each material issue area Morningstar is prioritizing.