The ESG risk of SPDR® MSCI Em Mkts Fssl Ful Free RsrvETF's holdings is comparable to its peers in the Global Emerging Markets Equity category, thus earning an average Morningstar Sustainability Rating of 3 globes. Funds in the same category rated 4 or 5 globes 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, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.
SPDR® MSCI Em Mkts Fssl Ful Free RsrvETF holds itself out to be a sustainable or ESG-focused investment. In other words, ESG concerns are central to the investment process of this strategy. A fund with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. One key area of strength for SPDR® MSCI Em Mkts Fssl Ful Free RsrvETF is its low Morningstar Portfolio Carbon Risk Score of 9.46 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.
The fund exhibits relatively high exposure (9.29%) 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.
The fund's 9.8% involvement in carbon solutions is roughly in line with the 9.5% average involvement of its peers in the Diversified Emerging Mkts 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 thermal coal. The fund mostly fulfills this goal; however, it does exhibit 0.59% exposure to such companies. This compares with 0.81% for its average peer in the Global Emerging Markets Equity category.