This fund has rather high exposure to ESG risk relative to its peers in the Trading Tools category, earning it the lowest Morningstar Sustainability Rating of 1 globe. Investors concerned about ESG risk may be better off with funds in the category that receive 4 or 5 globes, as they tend to 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 MicroSectors™ US Big Oil 3X Lvrgd ETN doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. One area to watch is the fund's high carbon risk exposure, as indicated by its Carbon Risk Score of 45.44, 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 average peer in the same Trading--leveraged Equity category has 9.44% 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.
No companies held by MicroSectors™ US Big Oil 3X Lvrgd ETN 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.