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Map: How Countries’ Stock Markets Stack Up on ESG Practices and Carbon Risk

The most sustainable non-European market is Hong Kong, which ranks fourth.

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Amid the market turmoil brought about by the outbreak of the coronavirus pandemic, funds focused on buying stocks that score well on environmental, social, and governance-related metrics proved to be a safer harbor for investors. These sustainable funds had an impressive year in 2020: Three out of four sustainable equity funds beat their Morningstar Category average. And even though the first quarter of 2021 was a challenging one for the performance of sustainable investments, the long-term investment case for ESG remains encouraging: The fact that ESG screens have led to resilience in recent down markets, driven by the relationship between sustainability and attributes like corporate quality and financial health, supports the view that ESG risk is material.

So, how do countries around the world compare on this front? According to the latest edition of the Morningstar Sustainability Atlas, European countries--particularly those in the north--lead the pack in ESG practices. These nations have always been ahead of the curve on ESG, but a few other countries also feature exceptionally strong sustainability profiles. Financial advisors and asset managers can use this data to identify countries with the greatest ESG investment opportunities and most significant risks. Morningstar Direct and Office clients can access the full report here.

The Morningstar Sustainability Atlas uses the constituents of Morningstar country indexes to examine the sustainability profiles of 48 country-specific equity markets. The company-level scores are sourced from Sustainalytics, which also powers the Morningstar Sustainability Rating for funds.

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