Global X Renewable Energy Producers ETF's holdings are exposed to average levels of ESG risk relative to those of its peers in the Global Equity Mid/Small Cap category, thus earning it an average Morningstar Sustainability Rating of 3 globes. Competing funds in the category with ratings of 4 or 5 globes have less ESG risk in their holdings. 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.
Global X Renewable Energy Producers ETF has a sustainability or ESG-focused mandate. Funds with an ESG-focused mandate are more likely to align with the expectations of an investor who cares about sustainability issues. Global X Renewable Energy Producers ETF has an asset-weighted Carbon Risk Score of 3.3, 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 98.7% involvement in carbon solutions is not only high in absolute terms, but also surpasses the 27.0% average involvement of its peers in the Utilities category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on.
Currently, the fund has 52.2% involvement in fossil fuels. It is considered high in absolute terms, albeit comparing favorably with 88.7% 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 (5.71%) 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.