This fund has a Morningstar Sustainability Rating of 5 globes, indicating that the ESG risk of holdings in its portfolio is rather low relative to those of its peers in the Morningstar US Equity Mid Cap category. ESG risk measures the degree to which material environmental, social, and governance issues, such as 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.
Kinetics Spin-Off and Corporate Rest Fd has an asset-weighted Carbon Risk Score of 2.6, 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. No companies held by Kinetics Spin-Off and Corporate Rest Fd are recognized as being involved in controversies at a high or severe level. 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 Spin-Off and Corporate Rest Fd 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 85.1% involvement in fossil fuels, which is high in both absolute and relative terms. The average peer in the same Mid-cap Growth category has 5.2% 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.