SPDR® Portfolio S&P 400 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 SPDR® Portfolio S&P 400 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. 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.
The fund's current involvement in fossil fuels rests at 7.88%, 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 has little exposure (0.90%) to companies with high or severe controversies. From bribery and corruption to workplace discrimination and environmental incidents, controversies are incidents that may negatively affect stakeholders, the environment, or the company’s operations.
One potential issue for a sustainability-focused investor is that SPDR® Portfolio S&P 400 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.
SPDR® Portfolio S&P 400 Mid Cap ETF has an asset-weighted Carbon Risk Score of 13.32. This is situated at the lower end of the medium carbon risk band, suggesting that its current equity and/or bond holdings are moderately 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.