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 Real Estate Sector Equity category. 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 Fundamental Income Net Lease Rl Estt ETF doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes.
Currently, the fund's involvement in fossil fuels is negligible, which is roughly on par with its average peer. No companies held by Fundamental Income Net Lease Rl Estt 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.
Fundamental Income Net Lease Rl Estt ETF has a 12-month asset-weighted Carbon Risk Score of 15.6. This is situated at the lower end of the medium carbon risk band, suggesting that its portfolio holdings are not among the worst-positioned to transition to a low-carbon economy, but they are not among the best-positioned either. Investors concerned about the transition risks may prefer to consider funds with negligible or low carbon risk. Such 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.