Morningstar Sustainalytics, a leading provider of independent investment insights, has recently announced significant enhancements to its ESG Risk Ratings. These upgrades include improvements to the corporate governance methodology and strengthening of three material ESG risk measures. The changes began on May 30 and are considered the most significant updates since the ratings were introduced in 2018.
According to Laura Lutton, the Director of ESG Product Management at Morningstar Sustainalytics, these enhancements are crucial for providing investors with the necessary data to address ESG-related risks and opportunities effectively. The ESG Risk Ratings help investors identify company exposure to industry-level ESG risks and assess how well companies are managing those risks. As the world continues to change rapidly, it is essential for ESG risk metrics to evolve accordingly. These enhancements represent a significant shift in methodology and aim to offer clients a more comprehensive view of ESG risks.
The first step in these enhancements involved an upgrade to the corporate governance methodology. With ESG issues becoming increasingly important in investment decisions, good governance is seen as a foundational element that can help companies operate robustly and mitigate risks. By aligning the corporate governance methodology with material ESG issues, Morningstar Sustainalytics aims to provide investors with a clearer signal on governance practices and potential risks in their portfolios.
Additionally, Morningstar Sustainalytics will be strengthening its material ESG risk measures by introducing new measures for raw materials use, water, and data privacy and cybersecurity. This thematic research will be implemented gradually across rated companies, with completion expected by September 2024.
In conclusion, Morningstar Sustainalytics is committed to providing investors with high-quality ESG data, research, and ratings to support responsible investment strategies. These enhancements reflect the firm’s dedication to helping investors navigate the evolving landscape of ESG risks and opportunities. For more information on Morningstar Sustainalytics and its services, visit their website at www.sustainalytics.com.
