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Engine No. 1 Transform Climate ETF NETZ Sustainability

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Sustainability Analysis

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Sustainability Summary


Engine No. 1 Transform Climate ETF is likely to concern sustainability-focused investors given certain substandard ESG attributes.

This fund lands in the 10% of strategies with the highest ESG risk in the US Equity Large Cap Blend category, earning it the lowest Morningstar Sustainability Rating of 1 globe. Investors concerned about ESG risk may be better off with funds earning 4 or 5 globes as they tend to hold securities less exposed to ESG risk. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, such as climate change and inequalities, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.

The fund's current involvement in fossil fuels reaches 13.87%, surpassing 7.41% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. Carbon solutions compose 8.39% of Engine No. 1 Transform Climate Etf's assets. This percentage lags behind its average peer in the Large Blend category, whose Carbon Solutions Involvement averages 11.71%. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on.

Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of Engine No. 1 Transform Climate ETF. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes.

Engine No. 1 Transform Climate ETF has an asset-weighted Carbon Risk Score of 14.62. 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. The fund exhibits moderate exposure (3.29%) 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.

ESG Commitment Level Asset Manager