ESG - Investing responsibly now for a more sustainable world in the future
Morningstar Sustainability Ratings are available in our interactive fund centre to help you identify which of our unit-linked funds' portfolios have a high engagement of companies using ESG (Environmental, Social and Governance) criteria to operate in a more responsible manner.
What is responsible investing?
Responsible investing is essentially the incorporation of additional analysis relating to environmental, social and governance factors to the asset selection process, along with ensuring that money invested is used to promote positive societal and global change. The additional factors are often called ESG.
Investing responsibly is not a new concept, with many asset managers having adopted screening processes or portfolios investing in ethical matters for some time, however major global initiatives have recognised the necessity of political and regulatory involvement to enact real change in the world, whether combatting the inevitability of climate change and its effects, eradicating poverty or promoting equality. Investor capital provides powerful leverage to engage with companies on ESG issues and enforce change. There is also mounting evidence that ignoring ESG matters in a changing world makes poor business sense; ESG analysis is now viewed as a pragmatic tool to mitigate risk in its own right. The establishment of key principles and initiatives outlining ESG criteria and stewardship of investor money has provided much needed clarity, increasing confidence and driving investment into ESG and thematic funds.
Do your clients want to invest more responsibly without sacrificing returns?
Investors' desire to invest in more socially friendly funds is increasing. In response to this, along with regulatory pressure, more companies are now integrating ESG criteria into their businesses to improve the way they operate. Evidence has shown that companies using ESG criteria are not only becoming more popular, but have exhibited resilience, making them better placed for long-term sustainable growth. And because of this, investors no longer have to sacrifice performance in order to invest in funds that are doing the right thing. They can invest with both their head and their heart.
To help advisers and investors evaluate how investment funds are meeting environmental, social and governance challenges, our interactive fund centre features Morningstar's Sustainability Ratings in the form of 1-5 globes (5 being high conviction, 1 being low).
Helping your clients invest for a better, more sustainable future
For investors looking to invest in funds with a specific investment theme, generally referred to as "thematic", our unit-linked fund range now includes a range of thematic equity funds* whose portfolios invest in companies operating sustainably, ethically or are using ESG criteria to run their businesses. The funds fall into one of the following six themes:*Funds not available to Hong Kong investors
Resources and energy
Focuses on renewable energy sources which are naturally replenished such as wind or solar power, reducing the use and depletion of fossil fuels. Also sustainable cultivation of woodlands to meet the demands of building materials and biodegradable replacement for plastic consumption.
Invests in socially responsible companies globally, often using screening techniques to avoid companies in certain sectors such as tobacco, alcohol, gambling and armaments, favouring companies fulfilling an environmentally or socially beneficial role, employing high standards of governance.