Foreign investments – ESG assessment
LSR’s investments in foreign markets are made through securities and investment funds. This means that LSR is not a direct investor in individual companies but invests in funds that in turn invest in equities and bonds worldwide.
The assessment of environmental, social, and governance (ESG) factors for the foreign portfolio is therefore based on the ESG ratings of the funds in which LSR invests. The funds themselves have established their own ESG criteria, which vary in approach — ranging from index funds with modest ESG objectives to funds that may be classified as impact investors with clear and ambitious ESG goals.
ESG rating from Morningstar
For the ESG assessment of the foreign portfolio, LSR relies on risk ratings from Morningstar. All registered investment funds with a measurable risk management framework covering the majority of their portfolio assets receive such an assessment. Morningstar uses a scale of 1–5, where 5 is the best score for ESG risk, 4 is above average, 3 is average, 2 is below average, and 1 is the lowest ESG risk rating.
| Rating | Notes | |
| 5. High | ︎︎︎︎︎🌐︎🌐︎🌐︎🌐︎🌐︎ | Outstanding management of EGS factors |
| 4. Above average | ︎︎︎︎🌐︎🌐︎🌐︎🌐︎ | Good management of EGS factors |
| 3. Average | ︎︎︎🌐︎🌐︎🌐︎ | Average management of EGS factors |
| 2. Below average | ︎︎🌐︎🌐︎ | Poor management of EGS factors |
| 1. Low | 🌐︎ | Unsatisfactory management of EGS factors |
EGS rating of foreign funds owned by LSR
The final score of each fund is determined by its overall ESG risk rating. Funds are categorised (Morningstar Global Category) based on their investment strategy and asset composition and are assessed relative to other funds within the same category. According to Morningstar’s methodology, this approach ensures that comparisons are based on consistent criteria, leading to a more meaningful assessment of the sustainability risk of funds.
If a fund receives a score of five, the point score is low, indicating that the fund’s ESG risk is well managed and therefore low. The opposite applies when a fund receives a score of one: the point score is high, ESG risk is not well managed, and therefore the overall risk is high.