August 13, 2015 / 4:20 PM / 4 years ago

Morningstar to score mainstream funds on ESG factors

BOSTON, Aug 13 (Reuters) - Research firm Morningstar Inc said it plans to score mainstream mutual funds and exchange-traded funds on environmental, social and governance factors, reflecting growing attention to the issues among investors.

Morningstar of Chicago said Thursday it will start scoring mutual funds later this year based on the so-called ESG ratings of companies held in fund portfolios. The ESG ratings will be provided by Sustainalytics, an Amsterdam research firm, and will be first licensed by Swiss private banking group Julius Baer.

Jon Hale, Morningstar director of manager research for North America, said the company is still working out how many funds it will initially score. It plans eventually to provide ESG scores for a broad range of funds with holdings including stocks and corporate bonds and sovereign debt, he said.

“It will allow for portfolio construction to happen in a way that’s been difficult for investors of all stripes” to date, Hale said in an interview.

Interest in ESG investing has risen with greater attention to issues of corporate governance and climate change. In a study, the Morgan Stanley Institute for Sustainable Investing found 71 percent of individual investors are interested in sustainable investing, Morningstar said. (Reporting by Ross Kerber; Editing by Jonathan Oatis)

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