American Funds New Economy Fund's holdings are exposed to average levels of ESG risk relative to those of its peers in the Global Equity Large 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. Unlike impact, which measures positive environmental and societal outcomes attributable to an investment, ESG risk reflects the degree to which investments could be affected by material ESG issues like climate change and inequalities.
One key area of strength for American Funds New Economy Fund is its low Morningstar Portfolio Carbon Risk Score of 6.18 and low fossil fuel exposure of 4.43% over the past 12 months, which earns it the Morningstar Low Carbon Designation. The fund is therefore well positioned to transition to a low-carbon economy.
One potential issue for a sustainability-focused investor is that American Funds New Economy Fund doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes.
The fund exhibits moderate exposure (6.08%) to companies with high or severe controversies. From bribery and corruption to workplace discrimination and environmental incidents, controversies are incidents that may negatively affect stakeholders, the environment, or the company’s operations.