This strategy has an above-average Morningstar Sustainability Rating of 4 globes, indicating that the ESG risk of holdings in its portfolio is relatively low compared with those of its peers in the Global Equity Large Cap category. 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.
AXA IM ACT Climate Equity ETF promotes environmental and/or social characteristics in accordance with Article 8 of the Sustainable Finance Disclosure Regulation. Funds classified by their managers as aligning with Article 8 or Article 9 would have a higher probability to drive positive ESG outcomes. AXA IM ACT Climate Equity ETF has an asset-weighted Carbon Risk Score of 5.5, indicating that its companies have low exposure to carbon-related risks. These are risks associated with the transition to a low-carbon economy such as increased regulation, changing consumer preferences, technological advancements, and stranded assets. The fund's 20.4% involvement in carbon solutions is not only high in absolute terms, but also surpasses the 11.7% average involvement of its peers in the Other Equity category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, tobacco, and and thermal coal. The fund fulfills this goal by having negligible investment exposure to each of these activities.
The fund aims to avoid, or limit exposure to, companies in violation with international norms, such as the UN Global Compact or the Universal Declaration of Human Rights.
Currently, the fund has 7.3% involvement in fossil fuels, which is roughly in line with 7.4% 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 exhibits moderate exposure (3.93%) to companies with high or severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. 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.