Catalyst Energy Infrastructure Fund has an average Morningstar Sustainability Rating of 3 globes, indicating that the ESG risk of holdings in its portfolio is similar to that of its peers in the Energy Sector Equity category. Investors concerned about ESG risk may be better off with funds in the category that receive 4 or 5 globes, as they tend to invest in 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.
One potential issue for a sustainability-focused investor is that Catalyst Energy Infrastructure 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. One area to watch is the fund’s carbon risk exposure. Its Carbon Risk Score of 26.13 is situated at the higher end of the medium carbon risk band, indicating the fund's investee companies are in a vulnerable position in the transition to a low-carbon economy. The score represented the asset-weighted carbon risk score of the portfolio's equity or corporate bond holdings, averaged over the trailing 12 months. These 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. Currently, the fund has 100.00% involvement in fossil fuels, which is high in both absolute and relative terms. The average peer in the same Energy Limited Partnership category has 98.05% 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. The fund exhibits relatively high exposure (9.78%) to companies with high or severe controversies. Companies with high or severe controversies may be involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose serious business risks to the company.