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 Global Equity Large Cap 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.
AB Sustainable Global Thematic Fund holds itself out to be a sustainable or ESG-focused investment. In other words, ESG concerns are central to the investment process of this strategy. A fund with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. One key area of strength for AB Sustainable Global Thematic Fund is its low Morningstar Portfolio Carbon Risk Score of 5.15 and low fossil fuel exposure of 3.55% 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 exhibits negligible exposure (1.53%) 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.
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 1.21% exposure to tobacco. This compares with 0.65% for its average peer in the Global Equity Large Cap category.
The fund's 9.2% involvement in carbon solutions is roughly in line with the 9.5% average involvement of its peers in the Global Large-stock Growth category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on.