Thursday, September 15, 2016

Marquette AIM Students Learned About Morningstar's New ESG Fund Rating Process

 David Gillette of Morningstar Addressed the AIM Students This Week on the Topic of ESG Investing

Dr. David Krause and David Gillette
On Wednesday, September 14th, the AIM students heard a presentation about ESG investing from David Gillette, Regional Sales Director Advisor Solutions, Morningstar. 
ESG stands for environmental, social and governance and there is some evidence that suggests that ESG criterion factors, when integrated into investment analysis and portfolio construction, may offer investors potential long-term performance advantages. 
ESG has become shorthand for investment methodologies that embrace ESG or sustainability factors as a means of helping to identify companies with superior business models.

According to Dr. David Krause, AIM program director, “David Gillette did a fine job talking with our students about Morningstar’s new ESG fund rating criterion. I believe that their rating scores will put additional pressure on some asset managers to support their claims that they invest in socially responsible companies.  It was useful for our students to understand that environmental, social and governance investing criteria can be quantified and that there is growing pressure from institutional and retail investors to own funds with high ratings.”
David Gillette of Morningstar
Morningstar’s process, which was unveiled in March, provides an ESG score on more than 20,000 mutual funds and ETFs offered to North American and European investors.  
Krause added, “This is an unprecedented amount of information that Morningstar is providing to investors. Whether it is TIAA, a community foundation or an individual investor, I feel that there will be greater demand to invest in funds with acceptable ESG ratings.”
According to the latest data from The Forum for Sustainable and Responsible Investment, there is nearly $7 trillion investing in ESG strategies in the U.S., which is up from $4.3 trillion in 2014, and up from $202 billion in 2007. 
While controversial within the industry, it is clear that there is widespread and growing interest in sustainable investing around the world. Interestingly, David Gillette presented data that showed Millennials to be more concerned about ESG investing than previous generations.

Dr. Krause concluded, “Investors are more sophisticated and want to know that they are investing to generate strong returns and to support best sustainability practices. By adding Morningstar Direct to our toolkit in the AIM program, we now have the ability to go beyond traditional financial research.”