Valerio Baselli: Hello and welcome to Amsterdam to the Morningstar Sustainable Investing Summit 2023 where Morningstar experts, investors as well as financial institutions are exploring all areas of sustainable finance and climate finance in particular. Joining me now is Morningstar CEO, Kunal Kapoor.
So, Kunal, I think that your opening speech this morning surprised a fair number of people within the audience. You were very optimistic, which is encouraging, although not very common, I have to say. Why do you feel so positive?
Kunal Kapoor: Well, first of all, thanks for having me here. And you're right, I feel more positive than the average person who looks at things in this context. And I feel positive for a few reasons, including one, that the amount of data that's being disclosed and the comparability of that data has really gotten to such a good spot that our ability to make decisions and act on that data is very meaningful. And so, you see investors, you see asset owners, corporate sustainability managers all talking the same language and driving the same outcomes based on that language. And so, I'm positive because I think the focus on really driving good long-term financial outcomes is based on a shared set of data now.
VB: Absolutely. Any strategic allocation needs a reliable data set. As you said, sustainability data developed tremendously. But how investors can use effectively such data? And what do you expect from the future?
KK: Yeah. Well, one of the things I'll say about being effective is not to get lost in all of the data. I think it's really important for an individual investor, no matter how small or how large you are, to really think about your own preferences and why they matter, and then use the data in a way to personalise your portfolio to those preferences. Obviously, you want to spend some time thinking about what the trade-offs may be because sometimes when you express your preferences in a portfolio, there will be trade-offs. But because we have this fantastic set of data now that's comparable, our ability to understand those trade-offs up-front is improving at a rapid pace and we're getting to a spot where I think we'll know more and more about which factors are the most material.
VB: Sure. The theme of the conference is close the gap – close the gap between words and actions, of course. What would be your suggestion for investors who really want to close the gap? How can we do that concretely?
KK: The most important way to do it is to hold the companies you're investing in accountable to what they've said. And I think investors are already very good at holding companies and management teams accountable. They're very vocal on many issues. There's no reason why investors can't be vocal on this issue as well.
VB: Okay. And finally, you know better than me, of course, that in the US ESG investing for several reasons has become more and more controversial and politicised. What do you expect from this point of view in the future? And above all, what role can Morningstar play in all of this?
KK: Well, I'm not a politician and so I'm going to steer clear of talking about why it's become politicised other than to say that I think a lot of the arguments you hear are very simplified, very focused and don't get to the heart of the matter, which is that it's a useful data set that can hopefully in time create materially positive long-term outcomes for investors. And I think that's the thing that's important for investors is to really use the data to start unearthing the factors that are material and that can make a difference in their portfolio. And I think as always, it's important to recognise it's not a short-term set of factors. When you invest in this fashion, it's with a long-term mindset because companies are changing to put themselves in a place where even if the world around them changes, they're able to succeed and thrive no matter what, and that's the core of creating long-term value.
VB: Kunal, thank you so much.
KK: Yeah, thanks for having me. It was fun.
VB: For more content on our Sustainable Investing Summit and further insights on the full investing landscape, check any of our international websites. In the meantime, for Morningstar, I'm Valerio Baselli.
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