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Schwab US Mid-Cap ETF™ SCHM Sustainability

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Sustainability Analysis

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Sustainable Summary

Schwab US Mid-Cap ETF™ has a number of attributes that may meet the expectations of sustainability-focused investors, despite some issues worthy of attention.

The ESG risk of Schwab US Mid-Cap ETF™'s holdings is comparable to its peers in the US Equity Mid Cap category, thus earning an average Morningstar Sustainability Rating of 3 globes. Funds in the same category rated 4 or 5 globes tend to hold securities less exposed to ESG risk. Unlike impact, which measures positive environmental and societal outcomes attributable to an investment, ESG risk reflects the degree to which investments could be affected by material ESG issues like climate change and inequalities.

The fund's current involvement in fossil fuels rests at 8.25%, which compares favorably with 8.37% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. The fund exhibits negligible exposure (0.76%) to companies with high or severe controversies. 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.

One potential issue for a sustainability-focused investor is that Schwab US Mid-Cap ETF™ doesn’t have an ESG-focused mandate. A fund with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes.

Schwab US Mid-Cap ETF™'s asset-weighted Carbon Risk Score of 12.00 is at the lower end of the medium carbon risk band. This suggests the fund’s investee companies are adequately positioned to transition to a low-carbon economy. 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.

ESG Commitment Level Asset Manager

An ESG Commitment Level Asset Manager rating is not assigned to this investment.

Morningstar analysts award an ESG Commitment Level Asset Manager ratings to investments that also receive Morningstar Analyst Ratings. Not all investments currently have Asset Manager rating. Morningstar is expanding its coverage, prioritizing investments that are most relevant to investors.