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First Trust Global Wind Energy ETF FAN Sustainability

Sustainability Analysis

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Sustainability Summary

First Trust Global Wind Energy ETF has a number of positive attributes that may appeal to sustainability-focused investors.

This fund has relatively low exposure to ESG risk compared with its peers in the Utilities Sector Equity category, earning it the second highest Morningstar Sustainability Rating of 4 globes. 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.

First Trust Global Wind Energy 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. First Trust Global Wind Energy ETF has an asset-weighted Carbon Risk Score of 8.5, indicating that its companies have low exposure to carbon-related risks. These are risks associated with the transition to a low-carbon economy such as increased regulation, changing consumer preferences, technological advancements, and stranded assets. The fund's 86.5% involvement in carbon solutions is not only high in absolute terms, but also surpasses the 36.6% average involvement of its peers in the Miscellaneous Sector category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. No companies held by First Trust Global Wind Energy ETF are recognized as being involved in controversies at a high or severe level. From bribery and corruption to workplace discrimination and environmental incidents, controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. 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.

Currently, the fund has 40.8% involvement in fossil fuels, which is high in both absolute and relative terms. The average peer in the same Miscellaneous Sector category has 16.1% exposure to fossil fuel-related businesses. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas.

ESG Commitment Level Asset Manager