The ordinary investor is more likely to have most of his money in mutual funds than individual stocks or bonds, but until recently there have been few options to determine how sustainable these funds may be.
In March, investment research company Morningstar rolled out the first sustainability ranking for mutual funds, where companies are ranked on their environmental, social and governance (ESG) performance and compared to their industry peers.
Morningstar’s ranking has been applied to over 21,000 mutual funds and exchange-traded funds globally that total $13 trillion in assets under management. The ranking is available on Morningstar’s website.
“This is a bigger deal than one would think at first blush,” said Natasha Lamb, director of equity research and shareholder engagement at Arjuna Capital. “It really does democratize access to more sustainable investments.”
Lamb mentions that prior to the ranking, employees had few options if they wanted to figure out whether their retirement funds held sustainable companies.
“The vast majority of people don’t have the luxury of understanding the ESG profile of their investment because there are so few publicly traded mutual funds and ETFs focused on sustainability,” said Lamb.
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