6.Example: Morningstar’s Sustainability Ratings As of 2021, Morningstar covered over 20,000 mutual funds and over 2,000 ETFs with a 1 to 5 score (the system was started in 2018). It uses company-level ratings from Sustainability?? (now part of Morningstar) to develop its fund ratings and the headline rating is freely available. Morningstar takes a ‘holdings-based approach’-a weighted average of portfolio companies’ ESG scores. No credit or assessment is given to managers’ efforts on shareholder engagement and public advocacy or on their sophistication, culture and investment strategy. One key critique on this approach is that holding-based approaches ignore intentional ESG strategy and the approach is necessarily backward-looking.Given that the correlation of the two major rating systems (Sustainalytics and MSCI) is low and variable and Morningstar uses only the Sustainalytics data for its calculations, there is limited comparability between the ratings and others.