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Global X MSCI China Energy ETF CHIE Sustainability

| Quantitative rating as of | See Global X Investment Hub

Sustainability Analysis

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Sustainable Summary

Global X MSCI China Energy ETF is likely to concern sustainability-focused investors given certain substandard ESG attributes.

This fund has rather high exposure to ESG risk relative to its peers in the Greater China Equity category, earning it the lowest Morningstar Sustainability Rating of 1 globe. Investors concerned about ESG risk may be better off with funds in the category that receive 4 or 5 globes, as they tend to hold securities 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, such as climate change and inequalities, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.

One potential issue for a sustainability-focused investor is that Global X MSCI China Energy ETF doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. An ESG issue worthy of special attention is Global X MSCI China Energy ETF's carbon risk exposure. The fund’s asset-weighted Carbon Risk Score of 49.81 is classed as high. Investee companies of this portfolio are therefore positioned to fare poorly in the transition to a low-carbon economy. Investments with high carbon risk classification will likely be disadvantaged in the transition to net zero, while those with low or negligible carbon risk may fare better. Currently, the fund has 95.46% involvement in fossil fuels, which is high in both absolute and relative terms. The average peer in the same China Region category has 5.45% exposure to fossil fuel-related businesses. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas. The fund has extremely high exposure (20.09%) to companies with high or severe controversies. From bribery and corruption to workplace discrimination and environmental incidents, controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, controversies can damage the reputation of both companies themselves and their shareholders.

ESG Commitment Level Asset Manager

An ESG Commitment Level Asset Manager rating is not assigned to this investment.

Morningstar analysts award an ESG Commitment Level Asset Manager ratings to investments that also receive Morningstar Analyst Ratings. Not all investments currently have Asset Manager rating. Morningstar is expanding its coverage, prioritizing investments that are most relevant to investors.