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Sustainability Resources for Investors

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We at Parnassus often get questions from investors who want to stay current with ESG trends. Sustainable development goals, sustainability reporting and the Morningstar® sustainability ratings are three resources you can use to understand how companies and funds are contributing to environmental, social and governance progress.

Sustainable Development Goals

Sustainable development goals (SDGs) are targets set by the United Nations that identify specific actions that governments, companies and other organizations can take to improve the quality of life globally. These 17 broad categories of goals cover issues ranging from climate change and clean water to economic disadvantages and social inequality. The UN has vowed to make significant progress in all these areas by 2030, and one notable force driving the adoption of SDGs has been the buy-in of large pension plans that are looking to align their investments with SDGs. Examples of U.S. companies that have committed to working toward specific SDGs include Mastercard, Intel and Microsoft.

Sustainability Reporting

More than 80% of the companies in the S&P 500 Index now publish sustainability reports or integrated reports that incorporate sustainability metrics into their legally required 10-K reports. Both types of reports disclose impacts of the issuing companies on society and the environment, and typically include reporting on improvements over time in areas like resource conservation, employee health and safety, and ethical supply chain practices. Some reports also include specific SDGs that the business has committed to addressing.

Morningstar Sustainability Ratings

Morningstar rates levels of sustainability for mutual funds using globe icons, where one globe is the lowest and five globes are the highest rating. These sustainability ratings are calculated by evaluating how each underlying company in a fund measures up relative to their peers in the same industry, with deductions for involvement in ESG controversies such as fines or lawsuits. The globe ratings, which are updated monthly on Morningstar’s website, allow investors to compare sustainability rankings across funds.

We welcome the increasing use of these and other resources to measure and monitor corporate social responsibility because we believe responsible investing can both reward long-term investors and make a difference for the future.

More information is available from the Global Reporting Initiative (SDGs), Ceres (sustainability reporting) and Morningstar (globe ratings).

Mutual fund investing involves risk, and loss of principal is possible.