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Why Are Primecap Funds So Sustainable?

These Gold-rated funds have Morningstar Sustainability Ratings of High despite not explicitly trying to do so.

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The Morningstar Sustainability Rating for funds, which we introduced in March, helps investors measure how sustainable a mutual fund's portfolio is--that is, how well the companies it owns are handling the various environmental, social, and governance (ESG) issues they face. Research firm Sustainalytics first looks at company-level ESG factors such as environmental and workplace policies, product safety, and corporate responsibility, combining these into an ESG score for each company. Penalties are assessed for any ESG-related controversies, ranging from minor issues to major problems such as Volkswagen's recent emissions scandal. The resulting Sustainability Scores are rolled up on an asset-weighted basis to calculate a Portfolio Sustainability Score, and funds are ranked against their Morningstar Category peers. Funds with a Sustainability Rating of High (represented by 5 globes) have holdings that collectively score very well on ESG factors, while funds with lower scores earn lower ratings, down to Low (represented by 1 globe).

David Kathman has a position in the following securities mentioned above: VPMCX. Find out about Morningstar’s editorial policies.