This fund has above-average exposure to ESG risk relative to its peers in the Infrastructure Sector Equity category, earning it the second-lowest Morningstar Sustainability Rating of 2 globes. 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.
Currently, the fund has 74.1% involvement in fossil fuels, which is high in both absolute and relative terms. The average peer in the same Infrastructure category has 49.7% exposure to fossil fuel-related businesses. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas.
Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of Ecofin Global Renewables Infras Fd. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes. Ecofin Global Renewables Infras Fd has an asset-weighted Carbon Risk Score of 7.3, indicating that its companies 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. Ecofin Global Renewables Infras Fd shows 84.0% involvement in carbon solutions. This percentage is high in absolute terms and surpasses the 24.6% average involvement of its peers in the Infrastructure category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. The fund has no exposure to 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.