Which Fund Groups Get the Most Globes?

We have looked at asset management firm’s average Morningstar Sustainability Rating score – and who the leaders and laggards are.

Annalisa Esposito 4 January, 2021 | 10:33AM
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Globe Rating

Morningstar's Globe Ratings are just one tool that can help investors work out a fund's ESG credentials. A 5 Globe Rating indicates a fund is at the top end of its peer group in terms of sustainability, while a 1 Globe Rating shows it is underperforming on sustainability issues. 

While this is useful to consider for each fund, it can also tell us about an investment group's attitude to ESG. A firm whose funds typically hold a higher than average Sustainability Rating would appear to take matters of environment, society and governance more seriously. Meanwhile, if an asset management group's funds typically score low against their peers, it would suggest ESG is not a high a priority at that group. 

We have looked at the average Sustainability Rating across asset management firms, and found just 4% have an average score of either 4 or 5 Globes across their fund range.

Our investigation look at UK-domiciled funds rated by Morningstar analysts, excluding asset management companies with fewer than 10 funds in their range. The majority, some 75%, of our sample of asset management firms had an average Sustainability Rating of 3 Globes across their range, and 22% scored an average 2 Globes. 

Elizabeth Stuart says an increasing number of asset managers are now claiming to incorporate ESG factors into their investment decisions, which makes life difficult for investors: “This leaves investors with a lot of work to do to differentiate between funds that truly focus on ESG and those using ESG considerations in a limited way."

5 Globes

4 Globes

3 Globes

2 Globes

1 Globe

0%

4%

75%

22%

0%

Morningstar Sustainability Rating

The Morningstar Sustainability Rating helps investors evaluate funds based on the sustainability profile of their underlying holdings. “The globe ratings, as they are widely known, are a measure of how well a fund’s holdings are managing their ESG Risks relative to the fund’s peer group," says Stuart. 

The rating, powered by Sustainalytics, ranges from 1 to 5, with 1 Globe indicating a Low score, 2 as Below Average, 3 for Average, 4 as Above Average, and 5 indicating a High Sustainability Rating for a fund in comparison to its peer group.  

Using this rating, investors can evaluate whether an ESG fund is living up to its mandate by holding companies that uphold best sustainability practices or they can scout for ‘conventional’ funds that hold companies that do well on ESG metrics.

Which Firms Score Highest on ESG?

The firm with the highest average number of globes across its range is Sarasin & Partners, which scores an average of 4.4 Globes across its suite of 12 funds. Seven of these 12 funds scored 5 Globes, including the five-star rated Sarasin Global Dividend fund, while two funds in the range have 3 Globes, and a further two funds scored 4 Globes. Only two have 3 Globes and the rest have 4 Globes.

In second position is BNY Mellon, scoring high with 4 Globes on average across its 28 strong range of funds. Among these are the four-star rated BNY Mellon UK Opportunities and five-star rated BNY Mellon Global Emerging Markets funds. 

Firm Average Globe Rating No. of Funds
Sarasin & Partners 4.4 12
BNY Mellon 4.0 28
Close Brothers 3.9 10
Hargreaves Lansdown 3.9 10
Schroders 3.8 13

However, on top of the Globe rating, now investors can also use the ESG Commitment Level to see which fund groups lead on ESG.

"ESG investing is complex. It often requires specialised knowledge or skill sets. Adding to the complexity is the new and changing nature of the field. For example, investor preferences can be varied, definitions nebulous, and regulatory and political considerations fast-moving," says Hortense Bioy, director of sustainability research at Morningstar.

Morningstar ESG Ratings Explained

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Annalisa Esposito  is a data journalist for Morningstar.co.uk