This fund has relatively low exposure to ESG risk compared with its peers in the Utilities Sector Equity category, earning it the second highest Morningstar Sustainability Rating of 4 globes. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.
iShares Global Clean Energy ETF holds itself out to be a sustainable or ESG-focused investment. In other words, ESG concerns are central to the investment process of this strategy. A fund with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. iShares Global Clean Energy ETF has an asset-weighted Carbon Risk Score of 5.7, indicating that its companies have low exposure to carbon-related risks. These are risks associated with the transition to a low-carbon economy such as increased regulation, changing consumer preferences, technological advancements, and stranded assets. Ishares Global Clean Energy Etf shows 86.7% involvement in carbon solutions. This percentage is high in absolute terms and surpasses the 37.0% average involvement of its peers in the Miscellaneous Sector category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. The fund aims to avoid, or limit exposure to, companies in violation with international norms, such as the UN Global Compact or the Universal Declaration of Human Rights.
The fund has no exposure to high or severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. Such controversies can also damage the reputation of both companies themselves and their shareholders.
Currently, the fund has 36.0% involvement in fossil fuels, which is high in both absolute and relative terms. The fossil fuel involvement of funds in the same Miscellaneous Sector category averages 17.4%. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas.
By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, tobacco, and and thermal coal. The fund mostly fulfills this goal; however, it does exhibit 0.16% exposure to companies involved in thermal coal. This compares with 36.37% for its average peer in the Utilities Sector Equity category.
United States