This fund has a Morningstar Sustainability Rating of 5 globes, indicating that the ESG risk of holdings in its portfolio is rather low relative to those of its peers in the Morningstar Technology Sector Equity category. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.
One key area of strength for SPDR® MSCI World Technology ETF is its low Morningstar Portfolio Carbon Risk Score of 1.95 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. The fund has little exposure (0.11%) to companies with high or severe controversies. 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 SPDR® MSCI World Technology ETF is not classified by its manager as Article 8 or Article 9 of the Sustainable Finance Disclosure Regulation. Funds classified by their managers as Article 8 or Article 9 either promote environmental or sustainable characteristics or have a sustainable investment strategy, respectively, and hence are more likely to drive positive ESG outcomes.