In sum, the Morningstar Sustainability Rating responds to investor demands for a more reliable, objective way to evaluate whether their investments reflect best sustainability practices. How the rating works The Morningstar Sustainability Rating is a measure of how well the companies held by a fund are managing their ESG risks and opportunities when compared with similar funds. We use company-level ESG data from Sustainalytics, a leading provider of ESG ratings and research, to calculate the rating. All funds with at least 50% of their assets in firms that have been assigned company-level ESG ratings by Sustainalytics will receive a rating. Exhibit 1: A Two-Step Process We assign a fund's Sustainability Rating in two steps: First, we derive a Morningstar Portfolio Sustainability Score. This score is an asset-weighted average of a portfolio's normalized company-level ESG scores with deductions made for the controversies in which the portfolio's holdings are currently involved.