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Kinetics Small Cap Opportunities Inst KSCYX Sustainability

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Sustainability Analysis

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Sustainability Summary

Kinetics Small Cap Opportunities Fund has a number of attributes that may meet the expectations of sustainability-focused investors, despite some issues worthy of attention.

This strategy holds securities with low exposure to ESG risk relative to those of its peers in the Morningstar US Equity Small Cap category, earning it the highest Morningstar Sustainability Rating of 5 globes. 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.

Kinetics Small Cap Opportunities Fund has an asset-weighted Carbon Risk Score of 1.2, 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. The fund has little exposure (1.41%) to companies with high or severe controversies. From bribery and corruption to workplace discrimination and environmental incidents, controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, they can damage the reputation of both companies themselves and their shareholders.

One potential issue for a sustainability-focused investor is that Kinetics Small Cap Opportunities Fund doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. Currently, the fund has 76.8% involvement in fossil fuels, which is high in both absolute and relative terms. The fossil fuel involvement of funds in the same Small Growth category averages 4.6%. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas.

ESG Commitment Level Asset Manager