Sustainable Investing: ESG Investing

Understanding sustainable investing

Sustainable investing, also known as ESG investing, is an approach that integrates environmental, social, and governance (ESG) factors into investment decisions. Unlike traditional investing, where the sole objective is to maximise returns while minimising risk, ESG investment strategies seek to achieve both financial performance and a positive impact on society and the planet.

There is growing recognition that ESG factors are not just ethical considerations—they are economic factors that can influence a company's long-term performance and resilience. Businesses that manage their ESG risks effectively are often better positioned for sustainable growth.

The Three Pillars of ESG Investing

Environmental

Evaluates how a company affects the environment and manages its ecological footprint.

Air pollution and carbon emissions
Climate change and greenhouse-gas management
Water and wastewater management
Energy efficiency and resource use

Social

Assess how the business treats its employees and the community.

Employment conditions and labour standards
Employee and community engagement
Diversity, equity, and inclusion practices
Customer welfare and human rights

Governance

Analyse the systems and policies that guide corporate leadership and ethical decision-making.

Executive's pay and accountability
Governing structure and independence
Corporate ethics and anti-corruption policy
Transparency in political and business practices

ESG Risk score

A sophisticated methodology is used to rate each company based on its exposure to environmental, social, and governance risks and its effectiveness in managing those risks.

Uses advanced methodologies and data-driven models.
Leverages AI-powered monitoring that tracks over 60,000 media sources and up to 1 million news articles daily.
Compares companies across peers and sub-industries with integrated corporate governance research.
The total ESG risk score is updated daily and reflected in your investment dashboard or stock summary cards.
Lower ESG scores indicate stronger risk management and more sustainable business practices.

ESG Controversy rating

In addition to risk scores, a controversy rating helps investors identify companies involved in incidents that could harm people, the environment, or their operations.

Rated on a scale of 1 to 5, with 5 indicating the most severe controversies.
Covers issues such as environmental violations, social misconduct, and governance scandals.

By understanding both risk and controversy ratings, investors can make informed ESG investment decisions that align with their values while managing potential risks effectively.

Why invest with ESG Risk Ratings?

Make informed investments

Know how exposed a company is to ESG risks that may impact its long-term performance and value.

Do good with every dollar

ESG Risk Ratings can help you invest with a socially responsible strategy.

Simplify sophisticated research

Independent corporate governance research and ratings are analysed across a large number of shares for a clear ESG risk score.

ESG top-rated companies

We've made it easy to build a portfolio aligned with your views on environmental, social and governance issues. Explore some of the companies with top ESG Risk Rating score.

Keen to learn more about ESG investing?

What is ESG investing?

ESG glossary of terms

Climate change

Have a question for us?

Ask us or get your queries sorted here

ESG stands for Environmental, Social and Governance. An ESG Risk Rating helps you make a more informed decision when it comes to investing in companies whose values on environment, social and governance align with yours.

View a company's ESG Risk Rating on the individual stock summary card above your Morningstar Recommendations on both the mobile and web platform.

Yes the ESG Risk Rating feature is free.

A sophisticated methodology is used to rate a company's economic exposure to Environmental, Social and Governance risk and how well it's managing those risks. More than 60,000 media sources and up to 1 million news articles a day are monitored through AI-powered digital content curation. Company ratings are compared across peers and subindustries with fully integrated corporate governance research and ratings.

A rating that determines the seriousness of a company's involvement in incidents and events that may negatively affect people, the environment or its operations. Controversies are rated on a scale from one to five, with five denoting the most serious with the largest potential impact.

Sustainable Investing: Environmental, Social & Governance (ESG)