This fund has the second-lowest Morningstar Sustainability Rating of 2 globes, indicating it holds securities with relatively high ESG risk compared to that of its peers in the US Equity Mid Cap 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 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.
One potential issue for a sustainability-focused investor is that Nuance Mid Cap Value Fund doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes.
One key area of strength for Nuance Mid Cap Value Fund is its low Morningstar Portfolio Carbon Risk Score of 9.66 and low fossil fuel exposure of 3.96% over the past 12 months, which earns it the Morningstar Low Carbon Designation. The fund is therefore well positioned to transition to a low-carbon economy. No companies held by Nuance Mid Cap Value Fund are recognized as being involved in controversies at a high or severe level. From bribery and corruption to workplace discrimination and environmental incidents, controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, controversies can damage the reputation of both companies themselves and their shareholders.