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DFA Em Mkts Sustnby Cor 1 Instl DESIX Sustainability

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Sustainability Analysis

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Sustainability Summary

DFA Em Mkts Sustnby Cor 1 Port has several promising attributes that may appeal to sustainability-focused investors.

DFA Em Mkts Sustnby Cor 1 Port has an average Morningstar Sustainability Rating of 3 globes, indicating that the ESG risk of holdings in its portfolio is similar to that of its peers in the Global Emerging Markets Equity category. Funds with 4 or 5 globes tend to hold securities that are less exposed to ESG risk. 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.

DFA Em Mkts Sustnby Cor 1 Port 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. Currently, the fund has 3.5% involvement in fossil fuels, which compares favorably with 7.9% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.

DFA Em Mkts Sustnby Cor 1 Port has a 12-month asset-weighted Carbon Risk Score of 10.1. This is situated at the lower end of the medium carbon risk band, suggesting that its portfolio holdings are not among the worst-positioned to transition to a low-carbon economy, but they are not among the best-positioned either. Investors concerned about the transition risks may prefer to consider funds with negligible or low carbon risk. Funds with a lower carbon risk classification may be more favored by investors concerned about transition risks, as such funds often tilt toward companies that operate in sectors less exposed to the transition (for example, healthcare and IT) or companies in more carbon-intensive sectors (for example, materials and utilities) that consider climate change in their business strategy, and therefore are positively aligned with the transition. The fund's 10.0% involvement in carbon solutions is roughly in line with the 9.6% average involvement of its peers in the Diversified Emerging Mkts category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, tobacco, thermal coal, and and small arms. The fund mostly fulfills this goal; however, it does exhibit 0.46%, 0.11%, and 0.31% exposure to companies involved in tobacco, thermal coal, and small arms, respectively. This compares with 0.7%, 0.78%, and 0.19% for its average peer in the Global Emerging Markets Equity category. The fund exhibits moderate exposure (5.45%) 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.

ESG Commitment Level Asset Manager