This fund has above-average exposure to ESG risk relative to its peers in the Infrastructure Sector Equity category, earning it the second-lowest Morningstar Sustainability Rating of 2 globes. Funds with 4 or 5 globes tend to hold securities that are less exposed to ESG risk. 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.
Currently, the fund has 71.5% involvement in fossil fuels, which is high in both absolute and relative terms. The fossil fuel involvement of funds in the same Infrastructure category averages 48.7%. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas.
Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of Ecofin Global Renewables Infras Fd. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes. Ecofin Global Renewables Infras Fd has an asset-weighted Carbon Risk Score of 6.6, 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. Ecofin Global Renewables Infras Fd shows 78.2% involvement in carbon solutions. This percentage is high in absolute terms and surpasses the 23.9% average involvement of its peers in the Infrastructure 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 Ecofin Global Renewables Infras Fd 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.