SPDR® MSCI Em Mkts Fssl Ful Free RsrvETF's holdings are exposed to average levels of ESG risk relative to those of its peers in the Global Emerging Markets Equity category, thus earning it an average Morningstar Sustainability Rating of 3 globes. Competing funds in the category with ratings of 4 or 5 globes have less ESG risk in their holdings. Unlike impact, which measures positive environmental and societal outcomes attributable to an investment, ESG risk reflects the degree to which investments could be affected by material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance.
Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of SPDR® MSCI Em Mkts Fssl Ful Free RsrvETF. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes. One key area of strength for SPDR® MSCI Em Mkts Fssl Ful Free RsrvETF is its low Morningstar Portfolio Carbon Risk Score of 9.28 and very low fossil fuel exposure over the past 12 months, which earns it the Morningstar Low Carbon Designation. Thus, the companies held in the portfolio are in general alignment with the transition to a low-carbon economy.
The fund's 10.2% involvement in carbon solutions is roughly in line with the 9.6% average involvement of its peers in the Diversified Emerging Mkts category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with thermal coal. The fund mostly fulfills this goal; however, it does exhibit 0.53% exposure to such companies. This compares with 0.82% for its average peer in the Global Emerging Markets Equity category. The fund exhibits moderate exposure (4.10%) to companies with 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.