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iShares ESG 1-5 Year USD Corp Bd ETF SUSB Sustainability

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Sustainability Analysis

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Sustainable Summary

iShares ESG 1-5 Year USD Corp Bd ETF has several promising attributes that may appeal to sustainability-focused investors.

This fund has relatively low exposure to ESG risk compared with its peers in the US Fixed Income category, earning it the second highest Morningstar Sustainability Rating of 4 globes. ESG risk measures the degree to which material environmental, social, and governance issues, such as climate change and inequalities, could affect valuations. ESG risk differs from impact, which is about driving positive environmental and social outcomes for society’s benefit.

Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of iShares ESG 1-5 Year USD Corp Bd ETF. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes. The fund has an asset-weighted Carbon Risk Score of 8.31, indicating that its current equity and/or bond holdings 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. Its 4.01% involvement in carbon solutions is higher than the 1.69% average involvement of its peers in the Short-term Bond category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on.

Currently, the fund has 7.97% involvement in fossil fuels, which is higher than 5.55% for the average peer in its category. 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 limit its exposure to, companies associated with controversial weapons, tobacco, thermal coal, and small arms. Yet this goal is far from achieved, as the fund exhibits 0.88%, 0.27%, and 0.53% exposure to controversial weapons, thermal coal, and small arms, respectively. This compares with 0.74%, 1.58%, and 0.25% for its average peer in the US Fixed Income category.

The fund has a modest level of exposure (5.02%) to companies with high or severe controversies. Companies with high or severe controversies are involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose serious business risks to the company.

ESG Commitment Level Asset Manager

An ESG Commitment Level Asset Manager rating is not assigned to this investment.

Morningstar analysts award an ESG Commitment Level Asset Manager ratings to investments that also receive Morningstar Analyst Ratings. Not all investments currently have Asset Manager rating. Morningstar is expanding its coverage, prioritizing investments that are most relevant to investors.