Morningstar Sustainalytics, a leading ESG research and rating provider, has announced the expansion of its ESG Risk Ratings coverage to allow for material ESG risk assessment across more asset classes and regions. The firm’s coverage universe now includes more than 16,300 analyst-based ESG Risk Ratings spanning public equity, fixed-income, and privately held companies, representing a nearly 30% increase in comprehensive issuer ratings. Furthermore, the research universe has been expanded to include more Chinese companies listed in Shanghai and Shenzhen, which are major regional contributors to emerging market indices.
Recent market signals indicate increasing sustainable fund inflows in fixed income, improved ESG risk management in emerging markets, and more sustainable opportunities in the global US $6.3 trillion total AUM private equity market. However, the lack of consistent ESG data has made it difficult for investors to evaluate considerations for asset classes other than public equity. Morningstar Sustainalytics’ expanded ESG Risk Ratings can now be used to inform security selection across a broader range of issuers and gain a more holistic perspective when assessing diversified portfolios.
According to this year’s asset owner survey by Morningstar Indexes and Sustainalytics, 85 per cent of respondents believe ESG factors are material to investment policy, demonstrating the growing influence that sustainable investment considerations have on the global market ecosystem. Sustainalytics enables broader investment decision-making, new ESG fund and ETF development, and index construction across multiple asset classes by providing access to this enhanced analyst-based research coverage. Sustainalytics’ ESG Risk Ratings also serve as the foundation for Morningstar Sustainability RatingsTM for funds, which currently support over 95,000 managed investment products globally.
The firm’s award-winning ESG Risk Ratings assess a company’s exposure to industry-specific material ESG risks and how well those risks are managed. This multidimensional approach provides an absolute measurement with comparable ratings across industries and sectors. In addition, Sustainalytics’ ESG Risk Ratings continue to emphasise the interconnected importance of supporting investor objectives, monitoring and reporting on portfolio performance and complying with region-specific ESG regulations such as the EU’s Sustainable Finance Disclosure Regulation.