This fund lands in the 10% of strategies with the lowest ESG risk in the US Equity Large Cap Value category, earning it the highest Morningstar Sustainability Rating of 5 globes. ESG risk measures the degree to which material environmental, social, and governance issues, such as climate change and inequalities, could affect valuations. ESG risk differs from impact, which is about driving positive environmental and social outcomes for society’s benefit.
Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of Invesco ESG S&P 500 Equal Weight ETF. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes. One key area of strength for Invesco ESG S&P 500 Equal Weight ETF is its low Morningstar Portfolio Carbon Risk Score of 6.93 and low fossil fuel exposure of 3.15% 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.
Its 8.51% involvement in carbon solutions is higher than the 7.53% average involvement of its peers in the Large Value 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 controversial weapons, tobacco, thermal coal, and small arms. The fund mostly fulfills this goal; however, it does exhibit 0.54% exposure to companies involved in small arms. This compares with 1.64% for its average peer in the US Equity Large Cap Value category. The fund has a modest level of exposure (3.89%) to companies with high or severe controversies. Companies with high or severe controversies are involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose serious business risks to the company.