“Many firms have improved their practices over the past couple of years, raising the bar for the industry overall,” said Hortense Bioy, global director of sustainability research at Morningstar, commenting on the results of the fifth edition of the Morningstar ESG commitment level report. Photo: Morningstar Europe

“Many firms have improved their practices over the past couple of years, raising the bar for the industry overall,” said Hortense Bioy, global director of sustainability research at Morningstar, commenting on the results of the fifth edition of the Morningstar ESG commitment level report. Photo: Morningstar Europe

Investors with a focus on sustainability should be selective in their choice of asset managers, as the industry sees an increasing number of firms rated as advanced or leaders in Morningstar’s ESG commitment level, says the global fund research firm in its latest report.

Nearly one-third of the 97 global asset managers analysed in Morningstar’s latest ESG commitment level report have achieved either Leader or Advanced status. Specifically, eight firms were rated as Leaders, and another 25 as Advanced, highlighting their strong commitment to environmental, social and governance (ESG) principles. This assessment, detailed in the fifth edition of the report, was published on Thursday 1 February 2024.

The study aims to map out the current state of the sustainable Investing sector by organising asset managers into four categories: Leader, Advanced, Basic and Low. This classification is part of Morningstar’s effort to navigate the complexities and obstacles of sustainable investing, especially the problem of greenwashing. Morningstar highlights the ESG commitment level as a key indicator for investors to gauge a firm’s adherence to ESG values.

Leaders in the field, including firms like Robeco, Impax, Parnassus, Australian Ethical, Boston Trust Walden, Domini Asset Management, Affirmative Investment Management and Stewart Investors, have consistently upheld their strong commitment to sustainability.

The Advanced group features both large and smaller to midsize firms, such as Amundi, Schroders, Fidelity, Axa and BNP Paribas, showing the industry’s varied engagement with sustainability. Despite not reaching the highest sustainability standards as the Leaders, these firms exhibit substantial ESG integration. Candriam, based in Luxembourg, retained its Advanced status due to its continued focus on sustainability.

Morningstar’s global director of sustainability research, Hortense Bioy, highlighted the need for investors focusing on sustainability to choose asset managers wisely. Bioy pointed out that there has been a notable uplift in the industry’s standards, with a significant rise in the number of firms classified as Advanced or Leader. This change, representing nearly one-third of the 97 asset managers reviewed, indicates a widespread enhancement in the adoption of ESG practices and resources, as well as in active ownership efforts throughout the sector.

Morningstar assigns grades to asset managers based on their ‘philosophy and process,’ ‘resources’ and ‘active ownership,’ as part of its ESG rating system introduced in 2020.

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