I will next month post a longer piece in the Watching Brief summarising the very interesting data I picked up from a Morningstar webinar on sustainable investing a couple of weeks back, but one of the key takeaways was that ESG (Environment, Sustainability and Governance) is a theme that has not just become mainstream, but is now potentially the leading selection criterion for many investors in Europe.
When marketing people can see that money is flowing in a certain direction, they create and adapt products to capture some of it. That introduces a risk of ‘greenwashing’ – the labelling of investment funds as being ESG ‘approved’ when in fact there is only a token adjustment in the fund manager’s investment processes.
Article on fossil fuel disinvestment
I know some of my readers are very seriously concerned about climate change risk. So am I. I recently wrote a piece for another blog on the subject of disinvestment from fossil fuel busineses – an approach that is being widely adopted by pension funds and other institutional investors.
I am not sure that disinvestment will actually help that much.
You can now read my thoughts in detail as I have added the article to this website – here.
ESG commitment level measuring
As the leaders in fund classification and filtering for ESG criteria, Morningstar are aware that their established Sustainability Globes system is a little limited and I would say that it does not use strict enough criteria to allow final fund selections for those of us that want to know in some detail what sort of companies our money will be invested in.
Morninstar have on their own web site various articles about how their assessments work, going back as far as 2016. These can be found with simple Google searches. But an article of particular interest published recently explains their more rigourous and newer ESG commitment level ratings, something I only recently became aware of. Here is a link to it. You may have to select the link twice to get past the audience filter landing page and you will need a Morningstar Basic (free) membership.
I also have available for anyone interested a long and detailed report (US based) that was the background to a webinar on Climate Aware funds that I tuned into last year. It will not give UK investors a fund picklist but it does offer some insights into how much analysis actualy goes into understanding the carbon footprint of investment funds.
All this I think is great news for those who want to personally do something to help improve the prospects of humanity still being alive on the globe in future centuries: we can direct our money away from negative business activities and in a small way play our part in mitigating climate change.
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