Only eight global asset managers out of 97 have met Morningstar’s highest ESG commitment level rating in its latest analysis.
The Morningstar ESG Commitment Level helps investors assess an asset manager’s alignment to their own sustainability preferences by providing insights into the firm’s sustainable-investing philosophies, ESG integration processes, resources and active ownership activities.
Of the 97 firms under Morningstar’s latest ESG Commitment Level coverage, 8% are rated Leader, 24% scored Advanced, 45% of firms received Basic, and 23% earned Low.
The vast majority of firms have improved their practices, Morningstar found, which has raised the bar for the industry overall as well as for the ESG Commitment Level evaluations.
Some firms have ramped up their efforts faster or to a greater extent than others and relative to where they were when Morningstar started assessing them a few years ago.
Out of the 12 asset managers highlighted in its accompanying report, five were upgraded, including: Comgest (to Advanced from Basic), Fidelity International (to Advanced from Basic), Pictet (to Advanced from Basic), Janus Henderson (to Basic from Low), and Man Group (to Basic from Low). Morningstar initiated coverage of Nordea at Advanced.
Since its previous reviews, Morningstar found Comgest and Fidelity International have invested “significantly” in personnel dedicated to sustainable-investing initiatives. Comgest’s team has nearly doubled in the past two years, and Fidelity International’s team has quadrupled since 2019.
“With this growth has come sensible structure, too,” the report said. Both firms have divvied up functional responsibilities (such as company research, corporate engagement, and client service) across different sub-teams, and both also enjoy direct lines of communication with executive leaders.
Comgest and Pictet have both made “great strides” in their active ownership programs in recent years, Morningstar found.
Pictet’s expanded engagement ambitions benefit from improvements in infrastructure to track progress in these engagements. In the case of Comgest, additional hands-on-deck have boosted the team’s capacity for direct corporate engagement.
Both firms are expanding their areas of focus as well, engaging companies on issues related to climate change and, in the case of Pictet, water and nutrition.
Two firms – Janus Henderson and Man Group – earned Morningstar ESG Commitment Level upgrades to Basic from Low. Both firms have grown their internal resources dedicated to ESG efforts, be that by creating and hiring a chief responsibility officer (as Janus Henderson did in early 2023) or adding climate expertise (in the case of Man Group), and the two firms were found to have each strengthened their respective ESG integration processes.
ESG improvements needed
However, Janus Henderson and Man Group both have some room to improve, according to Morningstar. “For instance, neither firm publishes proxy-voting rationales, which we consider to be best practice,” it said.
Other firms recently reviewed have similarly made investments in people, processes, and stewardship, but this progress hasn’t been enough to warrant a change in their respective ESG Commitment Levels.
This is the case for Amundi, HSBC, GAM, and Jupiter – three firms that maintained ESG Commitment Levels of Advanced – as well as for Baillie Gifford, Evenlode, and Ninety One, which stayed at Basic.
Hortense Bioy, global director of sustainability research at Morningstar, said: “More than ever, sustainability-focused investors should be discerning when selecting asset managers as ESG integration practices, resources, and active ownership activities can vary significantly.
“Many firms have improved their practices over the past couple of years, raising the bar for the industry overall. Some have ramped up their efforts faster or to a greater extent than others, and this is reflected in the higher number of upgrades this time.
“Almost a third of the 97 asset managers in our coverage now earn a Morningstar ESG Commitment Level of Advanced or Leader.”
