This fund lands in the 10% of strategies with the highest ESG risk in the Global Equity Large Cap category, earning it the lowest Morningstar Sustainability Rating of 1 globe. Funds with 4 or 5 globes tend to hold securities that are less exposed to ESG risk. Unlike impact, which focuses on generating positive environmental and societal outcomes, ESG risk measures 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.
One potential issue for a sustainability-focused investor is that VALIC Company I International Value doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate are more likely to align with the expectations of an investor who cares about sustainability issues. The fund exhibits relatively high exposure (10.91%) to companies with high or severe controversies. Companies with controversies may be involved in incidents such as corruption, employee abuses, and environmental incidents that have a negative impact on stakeholders or the environment. 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.
VALIC Company I International Value has an asset-weighted Carbon Risk Score of 9.1, 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 16.8% involvement in fossil fuels, which is roughly in line with 15.3% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.