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Morningstar’s Sustainalytics introduces new research, products, and insight to help investors address evolving ESG regulatory standards.

CHICAGO, October 7, 2024 -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment insights, today announces new resources to help investors and corporations address emerging regulatory reporting challenges related to the EU Action Plan.

As an extension of its EU Sustainable Finance Action Plan Solutions Suite, Morningstar Sustainalytics has launched a new Corporate Sustainability Reporting Directive (CSRD) aligned data offering which maps Sustainalytics data to emerging regulatory reporting requirements, a dedicated resource to support alignment with a new ESMA Fund Naming Rules Solution  and the next iteration of its EU Taxonomy solution enhancing coverage, quality and presentation of its ESG data.  

Catalina Secreteanu, Managing Director, ESG Solutions, Morningstar Sustainalytics, said on CSRD Aligned Data:

“The EU has made significant progress bringing company disclosures around ESG-related factors in line with traditional reporting requirements. Yet the increased level of transparency, disclosure and accountability and third-party assurance to enforce it, while good for investors, creates a range of new challenges for companies reporting ESG information and for the investors tracking them. For example, the pressure is currently rising as CSRD reporting requirements become reality for a myriad of major European companies on January 1. Our new CSRD aligned data program, part of our broader EU Sustainable Finance Action Plan Suite, helps our clients address these changes with confidence.”     

Arthur Carabia, ESG Policy Research Director, Morningstar Sustainalytics, said on ESMA Fund Naming Rules Solution:

“The ESMA guidelines on ESG funds’ names is a significant regulatory step up for investors moving away from transparency to portfolio composition requirements. Our research shows that more than 1,600 funds are exposed to at least one stock potentially in breach of activity-based exclusion rules. This represents a significant number of funds that may need to consider either divesting from the stocks or rebranding. Our new ESMA resource provides investors with a conservative approach to methodology while enabling them to customize exclusions to ensure regulatory alignment.”

Hortense Bioy, Head of Sustainable Investing Research, Morningstar Sustainalytics, said on EU Taxonomy:

“Leveraging our data powered by our enhanced EU Taxonomy solution, as outlined in our new EU Taxonomy research we found that at least 1,300 non-financial companies are now reporting on their Taxonomy-related activities. Encouragingly, the aligned capital investments reported by companies are rising, reaching a total of over USD $500 billion over the past years. But this year’s average alignment levels are quasi-unchanged compared to last year. On average, capex alignment remains at just about 19%. Aligned investment opportunities are expected to grow further when reporting on alignment for the four new environmental objectives of the Taxonomy becomes mandatory, namely circular economy, pollution prevention, biodiversity protection, and water and marine resources.”

CSRD Aligned Data

The Corporate Sustainability Reporting Directive, or CSRD, a cornerstone of the European Green Deal, expands the level of disclosure requirements for companies to report on risks, impacts and opportunities related to their environmental, social and governance practices to hold account for progress made regarding their sustainability strategies. The multi-year CSRD implementation, which begins January 1, 2025 and is expected to be completed in early 2029, will impact approximately 50,000 companies in the EU including 10,000 companies globally.

Built on a deep foundation of data, Sustainalytics’ CSRD aligned data offers quantitative and qualitative insights aligned with over 450 criteria from the European Sustainability Reporting Standards (ESRS) and encompassing up to 25,000 companies. Investors can use the comprehensive data set to perform portfolio analysis, assess the impact and financial materiality of ESG factors, comply with evolving regulatory standards and simplify CSRD reporting requirements.

ESMA Fund Naming Rules Solution

The aim of the ESMA guidelines on ESG Funds’ Names is to protect investors against greenwashing risk and to provide minimum standards for funds available for sale in the EU that use specific ESG terms in their names. The requirements include (1) a minimum of 80% of investments that meet environmental or social characteristics or sustainable investment objectives and (2) exclusions as set by EU regulation for Paris-aligned benchmarks, or PABs, and climate-transition benchmarks, or CTBs. Morningstar Sustainalytics’ ESMA Fund Naming Rules Solution provides investors with Data and Screenings solutions with a conservative approach to methodology while enabling them to customize exclusions to ensure alignment with regulatory expectations.

EU Taxonomy Solution

The EU Taxonomy is a classification tool that determines whether an economic activity is environmentally sustainable. It helps investors, companies, and policymakers make informed decisions by identifying activities that contribute substantially to environmental objectives, aiding the transition to a more sustainable economy. Morningstar Sustainalytics’ EU Taxonomy Solution provides investors with granular data to streamline regulatory reporting and enhance investment analysis. This comprehensive dataset covers all six objectives and three KPIs (revenue, capex, opex), supporting compliance with the latest ESG regulations and the use of this rich dataset for various other use cases.

About Morningstar Sustainalytics  

Morningstar Sustainalytics is a leading ESG data, research, and ratings firm that supports investors around the world with the development and implementation of responsible investment strategies. For more than 30 years, the firm has been at the forefront of developing high-quality, innovative solutions to meet the evolving needs of global investors. Today, Morningstar Sustainalytics works with hundreds of the world's leading asset managers and pension funds who incorporate ESG information and assessments into their investment processes. The firm also works with hundreds of companies and their financial intermediaries to help them consider material sustainability factors in policies, practices, and capital projects. Morningstar Sustainalytics has analysts around the world with varied multidisciplinary expertise across more than 40 industry groups. For more information, visit www.sustainalytics.com. 

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