InvestmentsMay 1 2019

Morningstar launches ESG managed portfolio service

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Morningstar launches ESG managed portfolio service

Morningstar has launched a managed portfolio service for ethical, social and governance (ESG) funds, initially available only on the Standard Life Wrap platform.

The range will consist of five funds and include both active and passive funds. The five portfolios are grouped by risk level, and the funds included in the portfolios will be chosen using Morningstar’s existing fund research capabilities.  

The ESG considerations are determined by 175 factors. Morningstar's portfolio management team typically selects funds with a high Morningstar sustainability rating and low Morningstar portfolio carbon risk score.

Dan Kemp, chief investment officer for EMEA at Morningstar, said: "Environmental, social, and governance concerns are becoming an important part of the financial planning process.

"Our aim is to enable investors to incorporate their values as part of their investing goals and also help advisers provide a broader range of solutions to their clients.

"Investors wishing to express their views should be able to do so while maintaining access to the highest quality investment strategies.

"We therefore apply the same rigour and resources we use to manage our conventional portfolios while ensuring that the underlying holdings are consistent with well-established ESG criteria."

Data compiled by Natixis shows fund buyers expect to increase their exposure to ESG products in the year ahead.

Patrick Connolly, chartered financial planner at Chase De Vere, said: "This is yet another sign of the growing importance of ESG factors in the investment industry.

"Many investment companies are launching or refining ESG products, in the belief that popularity for these approaches will increase significantly in the months and years ahead.

"The challenge is that the concept of ESG investing hasn’t yet caught on with many investors and ESG criteria can be subjective which makes it difficult to align products to investors’ beliefs."

david.thorpe@ft.com