This fund lands in the 10% of strategies with the highest ESG risk in the Technology Sector Equity 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. 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.
ProShares S&P Kensho Cleantech ETF 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. Currently, the fund's involvement in fossil fuels is negligible, which is roughly on par with its average peer. Proshares S&p Kensho Cleantech Etf shows 63.4% involvement in carbon solutions. This percentage is high in absolute terms and surpasses the 18.0% average involvement of its peers in the Technology category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. The fund has no exposure to 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.
ProShares S&P Kensho Cleantech ETF has a 12-month asset-weighted Carbon Risk Score of 11.7. This is situated at the lower end of the medium carbon risk band, suggesting that its portfolio holdings are not among the worst-positioned to transition to a low-carbon economy, but they are not among the best-positioned either. Investors concerned about the transition risks may prefer to consider funds with negligible or low carbon risk. Such funds invest in companies that tend to operate in sectors less exposed to the transition (such as healthcare and IT) and/or companies in more carbon-intensive sectors (such as industrials and utilities) but that consider climate change in their business strategy and products, and therefore are positively aligned with the transition.