Why Are Primecap Funds So Sustainable?
These Gold-rated funds have Morningstar Sustainability Ratings of High despite not explicitly trying to do so.
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.