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Responsible investing, how do we stack up?

Investing

While Australia is a leader in terms of investing with responsible governance in mind, it falls short when it comes to controversy, a new study finds.

Morningstar’s 2018 Sustainability Atlas found that Eurozone and Nordic markets were “the globe’s green leaders”, while China, Russia and the Middle Eastern markets are struggling with sustainability.

Australia, the report found, scored highly in social practices and on sustainability factors, particularly governance.

Denmark and the Netherlands took out first place in terms of the Countries’ Indexes' Sustainability Scores, with 60.5. Russia sat at the other end of the spectrum, with a 37.6 score.

Australia received 52.2.

“The Morningstar Sustainability Atlas takes a bottom-up approach,” Morningstar explained.

“National equity markets are scored on the basis of the companies constituting their equity market indexes. The same methodology that powers the Morningstar Sustainability Rating for funds is applied to assess the sustainability profile of indexes. As with funds, index Portfolio Sustainability Scores are weighted aggregates of company-level scores.”

Australia performed best (60.9) when measured by the Morningstar Country Indexes' Governance Scores, joining Colombia (66.1) as the only non-European markets to reach this tier.

Morningstar said Australia’s performance comes down to the Commonwealth Bank, Westpac, ANZ and NAB, which are all thought of as “standard bearers within their global peer group”.

The methodology used differed when creating the Morningstar Country Indexes’ Controversy Scores, meaning countries with higher scores had a higher exposure to companies with higher levels of controversy.

Measuring with this metric, Australia received 5.8 – one of the highest, or “severe”, scores.

Peru (0.5) and New Zealand (0.5) had the lowest controversy scores.

Responsible investing, how do we stack up?
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