Morningstar Inc. company, Sustainalytics, an environmental, social and governance (ESG) risk ratings and data provider, has announced the launch of its new impact metrics which will allow investors to more systematically monitor, measure and report on the ESG impacts of their portfolios.
“Regulatory initiatives such as the EU Sustainable Finance Action Plan and the growing importance of issues like climate change and diversity are becoming key priorities for institutional and individual investors alike,” Sustainalytics writes in a statement announcing the launch. “These priorities are placing more pressure on asset managers and asset owners to demonstrate how ESG-focused strategies can meet sustainability objectives.”
Increasingly companies are tracking ESG metrics for risk mitigation, but also to determine whether their investments are aligned with creating a more sustainable future, the company adds.
Sustainalytics says the metrics are designed to help those involved in product creation, including the construction of portfolios, funds and indexes to meet their impact objectives. The impact framework the metrics are based on (there are 40 metrics in total), covers impact themes including climate action, healthy ecosystems, resource security, basic needs and human development. Presently, the firm is providing ESG risk ratings for more than 12,000 companies.
“The use of ESG information has evolved rapidly over the last several years, from investors focusing on ESG integration, to now demonstrating whether their ESG investments deliver real world outcomes,” says Sustainalytics’ associate director of product strategy and development, Megan Wallingford. “Yet, measuring and reporting on positive and negative ESG outcomes has been difficult to date, given different interpretations on how to assess impact.” The impact metrics, she says, are designed to give investors a structured set of product and operational metrics to help them understand, monitor and show the impact of what companies produce and how they conduct their business.
