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Special Report

Special Report: ESG Risk and Opportunity

Morningstar analyzes how various industries are tackling the environmental, social, and governance risks they face--and which companies are best positioned.

In a recent letter to the CEOs of asset managers, BlackRock CEO Larry Fink called climate change “a defining factor in companies’ long-term prospects.” Climate risk is, says Fink, an investment risk. At the 2018 Morningstar Investment Conference, GMO founder Jeremy Grantham made a similar argument--and suggested that there’s money to be made by investing in companies that are addressing these risks.

”In the past few years, ESG analysis of companies has taken an important step forward, becoming increasingly centered around the concept of materiality," notes Jon Hale, head of Morningstar’s sustainability research. An environmental, social, or governance issue is "material” if it can be reasonably expected to have a financial impact on the company by denting future growth, increasing costs, or both.