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Morningstar Launches New Low Carbon Risk Index Family
Emphasizing Companies Aligned with the Transition to a Low-Carbon Economy
New family of indexes moves beyond carbon footprinting
and evaluates a company’s positioning for the future
Tokyo, Jan. 31, 2019—Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent
investment research, today announced the Morningstar Low Carbon Risk Index Family, a newgroup of indexes that provides diversified exposure to equities across regions and emphasizes
companies aligned with the transition to a low-carbon economy. Powered by Sustainalytics’Carbon Risk Rating, the indexes are created through an optimization process that targets low
portfolio-level carbon risk and fossil fuel exposure.
“Climate change is a significant challenge that impacts investors,” said Sanjay Arya, head ofIndexes at Morningstar. “This new family of indexes will empower investors to evaluate andinvest in companies that are adapting to the low-carbon economy and managing theirbusinesses strategically for the long term. Whether motivated by environmental concerns,
fiduciary obligations or investment outcomes, I believe the new indexes offer more options tolower carbon exposure without compromising returns.”
A new white paper, “Preparing for a Low Carbon Economy: Investing in the Era of Climate
Change,” explains how the Morningstar Low Carbon Risk Index Family addresses the urgency
around climate change by emphasizing companies aligned with the transition to a low-carbon
economy. Not only do the indexes reflect lower climate-related risks, they also exhibit attractive
investment attributes. The full white paper is available here for download.
“These indexes go beyond the common approach of carbon footprinting, which reflects current
emissions and is just a starting point for analysis of carbon risk,” said Dan Lefkovitz, strategist
for Morningstar Indexes. “Our new Morningstar Low Carbon Risk Indexes are the first toleverage Sustanalytics’ Carbon Risk Ratings – which assesses not only a company’s overall
carbon exposure but also its management of that exposure – to ultimately evaluate whether acompany is positioned to survive and thrive in a low-carbon economy.”
The new index family is Morningstar’s next step in supporting environmental concerns ofinvestors. In 2018, the company introduced the Morningstar Low Carbon Designation for funds
and the Morningstar Portfolio Carbon Risk Score to establish a methodology for investors toevaluate their portfolios’ carbon risk. In 2016, the company launched the Morningstar
Sustainability Rating™ to help investors evaluate funds based on environmental, social, andgovernance (ESG) factors, and it continues to publish thought leadership and research aboutsustainable investing. Learn more about the lineup of Morningstar Indexes here and1 of 2Morningstar’s commitment to socially responsible investing here. Follow the conversation on
Twitter with the hashtag #MstarESG.
Methodology
The Morningstar Low Carbon Risk Indexes are derived from the large- and mid-cap segment of
their equivalent broad market benchmark. For example, the constituents of the Morningstar
Global Markets Low Carbon Risk Index come from the Morningstar Global Markets Large-MidCap Index, which targets 90% of global equity market capitalization across developed andemerging markets. To be eligible, a company must have undergone a carbon risk assessment bySustainalytics, which provides carbon research on more than 4,000 companies across 130
industry groups.
Indexes are constructed using the 12-month trailing averages of both the Morningstar Portfolio
Carbon Risk Score and the Morningstar Portfolio Fossil Fuel Involvement, a weighted averageof constituent-level exposure to fossil-fuel-intensive industries. The number of stocks in eachindex is variable and subject to eligibility requirements, the results of the optimization process,and weighting considerations.
Indexes are rebalanced (weights reset) quarterly in March, June, September and December, andreconstituted (membership reset) semiannually in June and December, on the Monday
following the third Friday of the month. The Carbon Risk score data used for reconstitution is asof the last trading day in May and November.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America,
Europe, Australia, and Asia. The company offers an extensive line of products and services forindividual investors, financial advisors, asset managers, retirement plan providers and sponsors,and institutional investors in the private capital markets. Morningstar provides data andresearch insights on a wide range of investment offerings, including managed investment
products, publicly listed companies, private capital markets, and real-time global market data.
Morningstar also offers investment management services through its investment advisorysubsidiaries, with more than $207 billion in assets under advisement and management as ofSept. 30, 2018. The company has operations in 27 countries. For more information, visit
www.morningstar.com/company. Follow Morningstar on Twitter @MorningstarInc.
Morningstar first made an investment in Sustainalytics Holding B.V., a global provider ofenvironment, social and governance research and ratings, in 2017 and currently owns
approximately 40 percent. As part of this investment, Morningstar obtained various rights,
including representation on the Sustainalytics’ Board of Directors.
###© 2019 Morningstar, Inc. All Rights Reserved.
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