Morningstar Sustainalytics unveils low carbon transition ratings offering


Morningstar Sustainalytics, a global provider of ESG research, ratings and data, has launches its low carbon transition ratings.

According to Morningstar, the ratings are designed to provide investors with a forward-looking science-based assessment of a company’s current alignment to a net-zero pathway that limits global warming to 1.5 degrees.

Underpinning the ratings, the firm claims, is a holistic evaluation of a company’s strategy and actions toward meeting its net-zero commitments, offering investors a clear and comparable view of a company’s policies, governance practices, and investment plans.

Morningstar Sustainalytics currently provides Low Carbon Transition Ratings coverage for approximately 4,000 of the largest public companies and plans to expand to include over 12,500 companies by 2024. With these ratings, Morningstar claims investors have information to help identify and manage transition risks, respond to global regulatory requirements and disclosure initiatives, build climate investment strategies, and advance engagement activities.

The low carbon transition ratings were built by an in-house team of climate experts and the creators of its award-winning ESG Risk Ratings. Expressed as an Implied Temperature Rise, the offering offer investors a contextual signal that shows a company’s exposure to transition risks and opportunities based on its business model, emissions, and management performance.

The ratings are also based on the outcomes of scenario analysis from the PRI-commissioned Inevitable Policy Response (IPR) and include more than 85 management indicators weighted by GHG emissions and grouped by TCFD themes. Investors can also determine the scope and quality of a company’s climate risk disclosure with a TCFD module built into the research.

Morningstar Sustainalytics SVP of climate solutions Azadeh Sabour said, “As the effects of climate change further materialize, companies are likely to face rising transition costs tied to decarbonizing the global economy. Investors are becoming more aware of these risks and need a structured way to decipher corporate transition plans to determine whether companies are prepared to deliver the required business model transformation to transition to a low-carbon economy.

“Leveraging the consistent framework behind our Low Carbon Transition Ratings, investors can benefit from a distinct signal to understand the most material aspects of a company’s transition plans and how they compare across industries and geographies.”

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