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Delaware Ivy Natural Resources R IGNRX Sustainability

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Sustainability Analysis

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Sustainability Summary

Delaware Ivy Natural Resources may not appeal to sustainability-conscious investors.

The ESG risk of Delaware Ivy Natural Resources's holdings is comparable to its peers in the Natural Resources Sector Equity category, thus earning an average Morningstar Sustainability Rating of 3 globes. Funds in the same category rated 4 or 5 globes tend to hold securities less exposed to ESG risk. 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.

One potential issue for a sustainability-focused investor is that Delaware Ivy Natural Resources doesn’t have an 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 area to watch is the fund’s carbon risk exposure. Its Carbon Risk Score of 22.77 is situated at the higher end of the medium carbon risk band, indicating the fund's investee companies are in a vulnerable position in the transition to a low-carbon economy. The score represented the asset-weighted Carbon Risk Score of the portfolio's equity or corporate bond holdings, averaged over the trailing 12 months.These funds invest in companies that tend to operate in sectors less exposed to the transition (such as healthcare and IT) and/or companies in more carbon-intensive sectors (such as industrials and utilities) but that consider climate change in their business strategy and products, and therefore are positively aligned with the transition. Currently, the fund has 41.0% involvement in fossil fuels, which is high in both absolute and relative terms. The average peer in the same Natural Resources category has 29.5% 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. The fund has relatively high exposure (11.06%) 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.

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