Franklin US Large Cap Mltfctr Idx ETF may not appeal to sustainability-conscious investors.
Franklin US Large Cap Mltfctr Idx ETF's holdings are exposed to average levels of ESG risk relative to those of its peers in the US Equity Large Cap Blend category, thus earning it an average Morningstar Sustainability Rating of 3 globes. Competing funds in the category with ratings of 4 or 5 globes have less ESG risk in their holdings. 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.
Franklin US Large Cap Mltfctr Idx ETF has a Carbon Risk Score of 8.32, indicating portfolio companies face low carbon-related risks in the transition to a low-carbon economy.
One potential issue for a sustainability-focused investor is that Franklin US Large Cap Mltfctr Idx 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. Currently, the fund has 10.12% involvement in fossil fuels, which is higher than 7.77% for the average peer in its category. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.
The fund exhibits moderate exposure (8.31%) 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.