The ESG risk of Causeway Global Value Fund's holdings is comparable to its peers in the Global Equity Large Cap category, thus earning an average Morningstar Sustainability Rating of 3 globes. Funds in the same category rated 4 or 5 globes tend to hold securities less exposed to ESG risk. 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.
Causeway Global Value Fund has an asset-weighted Carbon Risk Score of 8.1, 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. Currently, the fund has 11.5% involvement in fossil fuels, which compares favorably with 16.6% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.
One potential issue for a sustainability-focused investor is that Causeway Global Value Fund doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. The fund has significant exposure (19.65%) to companies with high or severe controversies. Companies with controversies may be involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose some degree of business risks to the company. 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.