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ProShares Ultra Industrials UXI Sustainability

Sustainability Analysis

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Sustainability Summary

ProShares Ultra Industrials may not appeal to sustainability-conscious investors.

This fund has above-average exposure to ESG risk relative to its peers in the Trading Tools category, earning it the second-lowest Morningstar Sustainability Rating of 2 globes. Funds with 4 or 5 globes tend to hold securities that are less exposed to ESG risk. ESG risk measures the degree to which material environmental, social, and governance issues, such as climate change, biodiversity, human capital, as well as bribery and corruption, could affect valuations. ESG risk differs from impact, which is about driving positive environmental and social outcomes for society’s benefit.

One potential issue for a sustainability-focused investor is that ProShares Ultra Industrials 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 has significant exposure (13.94%) to companies with high or severe controversies. Companies with controversies may be involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose some degree of business risks to the company. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. Such controversies can also damage the reputation of both companies themselves and their shareholders.

Currently, the fund has 8.5% involvement in fossil fuels, which compares favorably with 11.4% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.

ProShares Ultra Industrials has a 12-month asset-weighted Carbon Risk Score of 14.7. This is situated at the lower end of the medium carbon risk band, suggesting that its portfolio holdings are not among the worst-positioned to transition to a low-carbon economy, but they are not among the best-positioned either. 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