This strategy has an above-average Morningstar Sustainability Rating of 4 globes, indicating that the ESG risk of holdings in its portfolio is relatively low compared with those of its peers in the US Equity Large Cap Growth category. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, such as climate change and inequalities, 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 Putnam Focused Large Cap Growth ETF is its low Morningstar Portfolio Carbon Risk Score of 3.75 and low fossil fuel exposure of 1.14% over the past 12 months, which earns it the Morningstar Low Carbon Designation. The fund is therefore well positioned to transition to a low-carbon economy. Currently, the fund's involvement in fossil fuels is negligible, and compares favorably with 3.42% for its average peer.
One potential issue for a sustainability-focused investor is that Putnam Focused Large Cap Growth ETF doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. The fund exhibits relatively high exposure (9.56%) to companies with high or severe controversies. Companies with high or severe controversies may be involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose serious business risks to the company.