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 US Equity Large Cap Value 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.
SPDR® S&P® U.S. Dividend Artcrts ESG ETF promotes environmental and/or social characteristics within the meaning of Article 8 of the Sustainable Finance Disclosure Regulation. Funds classified by their managers as Article 8 or Article 9 are more likely to deliver positive sustainability outcomes. SPDR® S&P® U.S. Dividend Artcrts ESG ETF has an asset-weighted Carbon Risk Score of 9.6, 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 current involvement in fossil fuels rests at 7.1%, which compares favorably with 13.0% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. By prospectus, the fund aims to avoid or minimize holdings in companies associated with controversial weapons, and as expected, the fund does not currently invest in such companies.
The fund aims to avoid or minimize holdings in companies breaching international norms, including the UN Global Compact or the Universal Declaration of Human Rights. The fund exhibits negligible exposure (1.40%) 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.