This strategy holds securities with low exposure to ESG risk relative to those of its peers in the Morningstar Greater China Equity category, earning it the highest Morningstar Sustainability Rating of 5 globes. 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 key area of strength for iShares MSCI Taiwan ETF is its low Morningstar Portfolio Carbon Risk Score of 6.34 and very low fossil fuel exposure over the past 12 months, which earns it the Morningstar Low Carbon Designation. Thus, the companies held in the portfolio are in general alignment with the transition to a low-carbon economy. No companies held by iShares MSCI Taiwan ETF are recognized as being involved in controversies at a high or severe level. From bribery and corruption to workplace discrimination and environmental incidents, controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, they can damage the reputation of both companies themselves and their shareholders.
A potential issue for a sustainability-focused investor is that iShares MSCI Taiwan ETF is not classified by its manager as Article 8 or Article 9 of the Sustainable Finance Disclosure Regulation, meaning that the fund doesn't aim to promote ESG characteristics or have a sustainable objective.