iShares MSCI ACWI Low Carbon Target ETF's holdings are exposed to average levels of ESG risk relative to those of its peers in the Global Equity Large Cap category, thus earning it an average Morningstar Sustainability Rating of 3 globes. Competing funds in the category with ratings of 4 or 5 globes have less ESG risk in their holdings. 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.
Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of iShares MSCI ACWI Low Carbon Target ETF. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes. One key area of strength for iShares MSCI ACWI Low Carbon Target ETF is its low Morningstar Portfolio Carbon Risk Score of 6.17 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.
Ishares Msci Acwi Low Carbon Target Etf shows 14.3% involvement in carbon solutions. This percentage surpasses the 11.8% average involvement of its peers in the Global Large-stock Blend category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on.
By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons and thermal coal. Yet this goal is far from achieved, as the fund exhibits 0.23% exposure to controversial weapons. This compares with 1.22% for its average peer in the Global Equity Large Cap category.
The fund exhibits moderate exposure (7.32%) to companies with high or severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. 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.