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SPDR® Bloomberg EM USD Bd ETF EMHC Sustainability

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Sustainability Analysis

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Sustainability Summary

SPDR ® Bloomberg EM USD Bd ETF may not appeal to sustainability-conscious investors.

This fund has above-average exposure to ESG risk relative to its peers in the Emerging Markets Fixed Income category, earning it the second-lowest Morningstar Sustainability Rating of 2 globes. 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.

One potential issue for a sustainability-focused investor is that SPDR® Bloomberg EM USD Bd ETF doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. One area to watch is the fund’s carbon risk exposure. Its Carbon Risk Score of 31.44 is situated at the higher end of the medium carbon risk band, indicating the fund's investee companies are in a vulnerable position in the transition to a low-carbon economy. The score represented the asset-weighted Carbon Risk Score of the portfolio's equity or corporate bond holdings, averaged over the trailing 12 months.These 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. Currently, the fund has 57.1% involvement in fossil fuels, which is high in both absolute and relative terms. The fossil fuel involvement of funds in the same Emerging Markets Bond category averages 39.7%. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas. The fund exhibits extremely high exposure (27.29%) to companies with high or severe controversies. Companies with controversies are involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose serious business risks to the company. 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.

ESG Commitment Level Asset Manager