This strategy has an above-average Morningstar Sustainability Rating of 4 globes, indicating that the ESG risk of holdings in its portfolio is relatively low compared with those of its peers in the Emerging Markets Fixed Income category. 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.
Ashmore Emerging Markets Corp Inc ESG Fd 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. One key area of strength for Ashmore Emerging Markets Corp Inc ESG Fd is its low Morningstar Portfolio Carbon Risk Score of 9.73 and very low fossil fuel exposure 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.
Its 15.0% involvement in carbon solutions is higher than the 5.9% average involvement of its peers in the Emerging Markets Bond 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 and tobacco. The fund fulfills this goal as its investment exposure to each of these activities is negligible.
The fund has a modest level of exposure (3.53%) to companies with high or severe controversies. Companies with controversies are involved in incidents such as corruption, employee abuses, and that pose some degree of business risks to the company. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, they controversies can damage the reputation of both companies themselves and their shareholders.