This strategy has an above-average Morningstar Sustainability Rating of 4 globes, indicating that the ESG risk of holdings in its portfolio is relatively low compared with those of its peers in the Utilities Sector Equity category. 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.
Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of iShares Global Clean Energy ETF. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes. iShares Global Clean Energy ETF has an asset-weighted Carbon Risk Score of 6.8, 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 86.3% involvement in carbon solutions. This percentage is high in absolute terms and surpasses the 36.6% 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 minimize holdings in companies breaching international norms, including the UN Global Compact or the Universal Declaration of Human Rights.
No companies held by iShares Global Clean Energy ETF are recognized as being involved in controversies at a high or severe level. From bribery and corruption to workplace discrimination and environmental incidents, controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, they can damage the reputation of both companies themselves and their shareholders.
Currently, the fund has 21.1% involvement in fossil fuels, surpassing 16.1% for the average peer in its category. Companies are considered involved in fossil fuels if they derive some 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. Yet this goal is far from achieved, as the fund exhibits 2.82% exposure to thermal coal. This compares with 37.28% for its average peer in the Utilities Sector Equity category.