<p>It is imperative for the fund management industry to integrate the current relevant global risks into its evaluation processes. This necessitates clarifying how sustainability ratings providers—the principal source of extra-financial information for fund managers—assess sustainability risks, as required by the Sustainable Finance Action Plan. To this end, this study aims to analyse how the Morningstar Sustainability Rating—one of the most widely used sustainability ratings by practitioners and researchers worldwide—evaluates sustainability risks and advances this assessment with a new proposal for a sustainability risk rating based on a strong sustainability approach. This measure minimises the offset of fund’s environmental, social, and governance (ESG) risks, in addition to considering the managed risk in relation to the ESG risk exposure.</p>