Anthony Serhan, managing director of research strategy, Asia Pacific on The Morningstar Sustainability Atlas.
Morningstar recently published the report The Morningstar Sustainability Atlas, which examines the sustainability profiles of Morningstar’s suite of 46 equity market indexes, up from 35 indexes in the initial edition of this report in October 2016. The country, indexes which span developed and emerging markets and represent 97% of global market capitalization, vary significantly across environmental, social, and governance (ESG) criteria.
Key Takeaways
- Europe is by far the world's leading region for sustainability. European markets dominate across environmental, social, and governance criteria, led by the Nordics and the eurozone.
- The US remains a middling performer from a sustainability perspective because of controversies involving prominent companies as well as mediocre scores on ESG pillars.
- The UK's Sustainability Score is the lowest in Western Europe, aside from Greece. Controversies plague several key UK index constituents.
- Outside of Europe, Australia is a leading market for ESG, driven in large part by its big banks.
- Taiwan is Asia's top market for sustainability, with a notably high score on the Social pillar.
- Emerging markets, in general, tend to score poorly, with China, Russia, and Middle Eastern markets near the bottom across ESG pillars.
- Colombia and South Africa, both emerging markets, score well on ESG criteria, as do India and Turkey.
- Japan remains one of the world's laggards when it comes to the Governance pillar, though China scores even lower.
About Morningstar Sustainability Atlas
We take a bottom-up approach to compose the Morningstar Sustainability Atlas. National equity markets are scored on the basis of the companies comprising their equity market indexes. The same methodology that powers the Morningstar Sustainability Rating for funds is applied to assess the sustainability profile of indexes. You can understand more about the methodology by visiting http://www.morningstar.com/company/sustainability.
Download the full paper here.
