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Direxion Daily Energy Bull 2X ETF ERX Sustainability

Sustainability Analysis

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Sustainability Summary


Direxion Daily Energy Bull 2X Shares is likely to concern sustainability-focused investors given certain substandard ESG attributes.

The fund has the lowest Morningstar Sustainability Rating of 1 globe, indicating that the ESG risk of holdings in its portfolio is rather high compared to those of its peers in the Trading Tools category. Investors concerned about ESG risk may be better off with funds earning 4 or 5 globes, as they hold securities less exposed to ESG risk. Unlike impact, which focuses on generating positive environmental and societal outcomes, ESG risk measures the degree to which investments could be affected by material ESG issues like climate change and inequalities.

One potential issue for a sustainability-focused investor is that Direxion Daily Energy Bull 2X Shares doesn’t have an 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. One area to watch is the fund's high carbon risk exposure, as indicated by its Carbon Risk Score of 41.21, suggesting that the portfolio is positioned to fare poorly in the transition to a low-carbon economy. This score represents the asset-weighted carbon risk score of the portfolio's equity or corporate bond holdings, averaged over the trailing 12 months. Companies with high risk classification will likely be disadvantaged in the transition to net zero, while those that are less exposed to climate risks and enable the transition by offering carbon solutions may fare better. Currently, the fund has 100.00% involvement in fossil fuels, which is high in both absolute and relative terms. The fossil fuel involvement of funds in the same Trading--leveraged Equity category averages 9.44%. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas.

No companies held by Direxion Daily Energy Bull 2X Shares are recognized as being involved in controversies at a high or severe level. 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