Loomis Sayles Small Cap Value Fund may not appeal to sustainability-conscious investors.
The ESG risk of Loomis Sayles Small Cap Value Fund's holdings is comparable to its peers in the US Equity Small Cap 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 and inequalities, could affect valuations. ESG risk differs from impact, which is about driving positive environmental and social outcomes for society’s benefit.
The fund has no exposure to high or severe controversies. From bribery and corruption to workplace discrimination and environmental incidents, controversies are incidents that may negatively affect stakeholders, the environment, or the company’s operations.
One potential issue for a sustainability-focused investor is that Loomis Sayles Small Cap Value Fund doesn’t have an ESG-focused mandate. A fund with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. Currently, the fund has 12.13% involvement in fossil fuels, which is higher than 6.75% for the average peer in its category. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.
Loomis Sayles Small Cap Value Fund's Carbon Risk Score of 13.91 is at the lower end of the medium carbon risk band. This score represents the asset-weighted carbon risk score of the portfolio's equity or corporate bond holdings, averaged over the trailing 12 months. This suggests the fund’s current holdings are moderately positioned to transition to a low-carbon economy. Funds with a lower carbon risk classification may be more favored by investors concerned about transition risks, as such funds often tilt toward companies that operate in sectors less exposed to the transition (for example, healthcare and IT) or companies in more carbon-intensive sectors (for example, materials and utilities) that consider climate change in their business strategy, and therefore are positively aligned with the transition.