This fund has a Morningstar Sustainability Rating of 5 globes, indicating that the ESG risk of holdings in its portfolio is rather low relative to those of its peers in the Morningstar Miscellaneous category. 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.
One key area of strength for Nationwide Nasdaq-100® Risk-Mngd Inc ETF is its low Morningstar Portfolio Carbon Risk Score of 3.60 and very low fossil fuel exposure over the past 12 months, which earns it the Morningstar Low Carbon Designation. Thus, the companies held in the portfolio are in general alignment with the transition to a low-carbon economy.
One potential issue for a sustainability-focused investor is that Nationwide Nasdaq-100® Risk-Mngd Inc ETF doesn’t have an 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. The fund exhibits relatively high exposure (9.14%) 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.