All Cap Idx Fd may not appeal to sustainability-conscious investors.
The ESG risk of Knights of Columbus U.S. All Cap Idx Fd's holdings is comparable to its peers in the US Equity Large Cap Blend 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. Unlike impact, which measures positive environmental and societal outcomes attributable to an investment, ESG risk reflects the degree to which investments could be affected by material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance.
Knights of Columbus U.S. All Cap Idx Fd has an asset-weighted Carbon Risk Score of 7.7, 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.
One potential issue for a sustainability-focused investor is that Knights of Columbus U.S. All Cap Idx Fd 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. By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons. However, the fund struggles to fulfill this goal, as it exhibits 0.4% exposure to such companies. This compares with 1.57% for its average peer in the US Equity Large Cap Blend category. The fund has relatively high exposure (9.58%) 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.
Currently, the fund has 9.6% involvement in fossil fuels, which is roughly in line with 8.5% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.