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iShares MSCI Global Energy Producers ETF FILL Sustainability

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Sustainability Analysis

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Sustainability Summary

iShares MSCI Global Energy Producers ETF may not appeal to sustainability-conscious investors.

This fund has rather high exposure to ESG risk relative to its peers in the Energy 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. 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, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance.

One potential issue for a sustainability-focused investor is that iShares MSCI Global Energy Producers ETF doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. An ESG issue worthy of special attention is iShares MSCI Global Energy Producers ETF's carbon risk exposure. The fund’s asset-weighted Carbon Risk Score of 42.0 is classed as high. Investee companies of this portfolio are therefore positioned to fare poorly in the transition to a low-carbon economy. Investments with high carbon risk classification will likely be disadvantaged in the transition to net zero, while those with low or negligible carbon risk may fare better. Currently, the fund has 98.3% involvement in fossil fuels, which is high in both absolute and relative terms. The average peer in the same Equity Energy category has 87.2% 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. The fund exhibits relatively high exposure (9.31%) 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.

ESG Commitment Level Asset Manager