The Enhanced Morningstar Sustainability Rating

Morningstar has now incorporated country ESG risks into the globe rating.

Ian Tam, CFA 23 November, 2021 | 1:41AM
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Ian Tam: A few short years ago back in 2016, Morningstar released the Morningstar Sustainability Rating for funds also informally known as the globe ratings to the global markets. And for the first time, investors were able to harness Morningstar's industry leading holdings data in combination with Sustainalytics company specific risk ratings to quickly understand the degree of ESG risk within a fund's portfolio relative to its global peers. And earlier this week, we've enhanced this rating.

In short, Morningstar has now incorporated sovereign ESG risk also known as country ESG risks to that sustainability rating. And for those that have used the globe ratings in the past, you would have noticed that we only provide globe ratings to fund for which Sustainalytics has coverage on at least two-thirds or about 67% of the portfolio. And that's no easy feat, seeing as Morningstar provides these ratings for over 61,000 funds globally. In the broad majority of cases, fixed income funds or balanced funds were the ones that really didn't receive a rating simply because of their holdings within sovereign debt. This has now changed we are now thrilled to announce that we provide the globe ratings for over 83,000 investment products worldwide, covering an absolutely integral part of most investors' asset allocations.

Here in Canada, this is increasingly important, seeing as retail investment in sustainable products continue to gain traction, and the fact that many Canadians asset allocations still sit within balanced funds and fixed income funds, which makes sense due to our ageing demographics. With this enhancement 5,800 additional globe ratings are now available on funds available for sale in Canada, allowing more investors to understand the degree of ESG risks within their fund's holdings.

More details about this ratings change is available in the link below. And remember that the globe ratings or Morningstar Sustainability Ratings for funds is available right here on Under the Analysis tab, whenever you look up a fund or an ETF.

For Morningstar I'm Ian Tam.

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About Author

Ian Tam, CFA  is Investment Specialist at Morningstar Canada. 


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