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Delaware Climate Solutions I IVEIX Sustainability

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Sustainability Analysis

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Sustainability Summary

Delaware Climate Solutions Fund has several promising attributes that may appeal to sustainability-focused investors.

This fund has relatively low exposure to ESG risk compared with its peers in the Energy Sector Equity category, earning it the second highest Morningstar Sustainability Rating of 4 globes. 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.

Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of Delaware Climate Solutions Fund. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes. Delaware Climate Solutions Fund shows 37.2% involvement in carbon solutions. This percentage is high in absolute terms and surpasses the 6.8% average involvement of its peers in the Equity Energy category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on.

Currently, the fund has 55.4% involvement in fossil fuels. It is considered high in absolute terms, albeit comparing favorably with 87.1% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.

Delaware Climate Solutions Fund has a 12-month asset-weighted Carbon Risk Score of 15.0. 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. Such 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. The fund exhibits moderate exposure (2.87%) 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