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Calculating a Morningstar Sustainability Rating in a Portfolio Analysis Workbook

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You can now calculate a Morningstar Sustainability Rating for a model portfolio, client account, or proposal. You can think of using this feature two ways:

  1. Calculate a Morningstar Sustainability Rating for a portfolio composed of managed products which might already have a Morningstar Sustainability Rating themselves, such as open-end funds and ETFs.
  2. Calculate a Morningstar Sustainability Rating for a portfolio of stocks, to see how it compares to peer investments if it were launched as an investible product.

Leveraging this new capability requires you to add the new Sustainability Ratings Analysis component to a worksheet in a Portfolio Analysis workbook. You can add the component by either editing an existing worksheet or creating a new worksheet. By default, the component uses the US Large Value category as the basis for the rating’s calculation. Be sure to use the Component Settings icon to change this setting to a more appropriate Morningstar Category. (Note: not all Morningstar Categories have enough funds with a Portfolio Sustainability Score to merit the Morningstar Sustainability Rating calculation. If this is the case for the category you choose, then the application cannot calculate a Morningstar Sustainability Rating for the model portfolio.)

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Remember to rename the worksheet to which you added the component. To preserve the changes you made of adding the component and renaming the worksheet, be sure to save the workbook.

Take note that the Sustainability Ratings Analysis component shows you not only the Morningstar Sustainability Rating for the model portfolio, but also the Portfolio ESG, Controversy, and Sustainability scores. You can also see where the portfolio’s score lands within the rating’s range.

If you have the entitlement enabled to see equity-level ESG data in Morningstar Direct Cloud, once you review the Morningstar Sustainability Rating for a model portfolio, consider using the Holdings worksheet to examine how the rating could be improved. From the Component Settings menu, change the Data Set to ESG Statistics. (Note: to learn more about this entitlement, please contact your Customer Success Manager or sales rep.)

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