Rating systems are a valuable tool for advisors and investors in choosing mutual funds when they do not have the time to research underlying corporate holdings themselves. Therefore, the rigor of a system’s evaluation criteria and process is of paramount importance. Our publication “Rigor in Ratings” compares our Heart Rating with the new Morningstar Sustainability Rating®.
Conscientious investors want to know their assets are working for social and environmental good or, at a minimum, the least harm possible in a mutual fund. On average, clients with funds labeled as “socially responsible” investments may not realize their assets are barely different from the conventional finance they were trying to avoid, while more knowledgeable investors may be frustrated and confused to see problematic holdings included.
We have recommendations for the design of a comprehensive system that takes into consideration scoring methodology, client intentionality, and the inclusion of advocacy activity and community investing.