This strategy holds securities with low exposure to ESG risk relative to those of its peers in the Morningstar US Equity Small Cap category, earning it the highest Morningstar Sustainability Rating of 5 globes. ESG risk measures the degree to which material environmental, social, and governance issues, such as climate change, biodiversity, human capital, as well as bribery and corruption, could affect valuations. ESG risk differs from impact, which is about driving positive environmental and social outcomes for society’s benefit.
Boston Trust Walden SMID Cap has a sustainability or 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. One key area of strength for Boston Trust Walden SMID Cap is its low Morningstar Portfolio Carbon Risk Score of 8.67 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.
By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, tobacco, thermal coal, and and small arms. The fund fulfills this goal by having negligible investment exposure to each of these activities. No companies held by Boston Trust Walden SMID Cap 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.
The fund's 7.2% involvement in carbon solutions is roughly in line with the 7.9% average involvement of its peers in the Mid-cap Blend category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on.