Impact Shares NAACP Minority Empwrmt ETF has an average Morningstar Sustainability Rating of 3 globes, indicating that the ESG risk of holdings in its portfolio is similar to that of its peers in the US Equity Large Cap Blend category. 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.
Impact Shares NAACP Minority Empwrmt 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. Impact Shares NAACP Minority Empwrmt ETF has an asset-weighted Carbon Risk Score of 6.3, 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. Impact Shares Naacp Minority Empwrmt Etf shows 27.8% involvement in carbon solutions. This percentage is high in absolute terms and surpasses the 13.1% average involvement of its peers in the Large Blend category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. The fund aims to avoid or minimize holdings in companies breaching international norms, including the UN Global Compact or the Universal Declaration of Human Rights.
By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with tobacco and thermal coal. Yet this goal is far from achieved, as the fund exhibits 1.36% exposure to thermal coal. This compares with 0.93% for its average peer in the US Equity Large Cap Blend category. The fund exhibits high exposure (16.57%) to companies with severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. 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.
Currently, the fund has 8.4% involvement in fossil fuels, which is roughly in line with 8.5% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.