Putnam International Capital Opp Fund may not appeal to sustainability-conscious investors.
Putnam International Capital Opp 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 Global Equity Mid/Small 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 invest in securities less exposed to ESG risk. Unlike impact, which measures positive environmental and societal outcomes attributable to an investment, ESG risk reflects the degree to which investments could be affected by material ESG issues like climate change and inequalities.
No companies held by Putnam International Capital Opp 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.
One potential issue for a sustainability-focused investor is that Putnam International Capital Opp 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. The fund's current involvement in fossil fuels reaches 7.06%, surpassing 5.88% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.
Putnam International Capital Opp Fund's asset-weighted Carbon Risk Score of 10.51 is at the lower end of the medium carbon risk band. This suggests the fund’s investee companies are adequately positioned to transition to a low-carbon economy. Investors concerned about the transition risks may prefer to consider funds with negligible or low carbon risk. 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.