Morningstar expands analysis of ESG commitments by asset managers

In the fund tracker's second round of measuring the ESG commitment of asset managers, it found that most fund companies rank near the bottom.


Morningstar rolled out its second round of ESG Commitment Level assessments, expanding to cover nearly 900 individual funds and 71 asset managers, globally.

The latest report, which follows last fall’s debut of the qualitative ratings system, is designed to help investors and financial advisers better understand where asset managers and underlying funds are in their “ESG journey,” according to Hortense Bioy, Morningstar’s London-based global director of sustainability research.

“The reason we’re doing this is because investors need help identifying those asset managers and strategies that are really doing ESG beyond what someone would just consider basic,” Bioy said. “A lot of firms claim they are doing ESG, but investors need help” analyzing and understanding the actual effort being put forth.

The assessments of ESG commitments, which debuted in November with ratings on 649 funds and 40 asset managers, are designed to enhance Morningstar’s quantitative globe ratings, Bioy explained.

So far, most asset managers are hovering around the bottom half of the levels of ESG commitments, which include low, basic, advanced and leader. But Bioy said that at this point, investors and advisers shouldn’t be too critical of companies that are making an effort, even if they are currently falling short of perfection.

“It’s more a matter of being transparent and explaining to investors what those asset managers are doing and how far along they are on their journey,” she said.

For example, of the 31 asset managers assessed in the current round, only one, Australia’s Affirmative Investment Management, was awarded the top accolade of leader.

Five firms, including Amundi, BNP Paribas Asset Management, HSBC Global Asset Management, Jupiter and LGIM, earned the advanced level. 

The largest group of asset managers, 13 in total, received the basic level, including Allianz Global Investors, Invesco, JPMorgan, State Street and T. Rowe Price, while 12 earned the level of low, including Franklin Templeton, Janus Henderson, Mellon Investments and VanEck. 

Commitment level assessments for asset managers consider three “key pillars,” including resources, philosophy and process, and active ownership.

“A lot of the U.S. firms are basic, because a lot of them are still early on the journey,” Bioy said.

At the fund level, out of the 140 strategies evaluated among the 251 funds assessed, one was awarded the level of leader and 19 were classified as advanced. Fifty-nine earned a basic level, while 61 earned an ESG level of low.