Pear Tree Polaris Small Cap Fund has several promising attributes that may appeal to sustainability-focused investors.
This fund has relatively low exposure to ESG risk compared with its peers in the US Equity Small Cap category, earning it the second highest Morningstar Sustainability Rating of 4 globes. 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's current involvement in fossil fuels rests at 7.57%, which compares favorably with 8.72% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. No companies held by Pear Tree Polaris Small Cap 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 Pear Tree Polaris Small Cap 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.
Pear Tree Polaris Small Cap Fund has an asset-weighted Carbon Risk Score of 13.26. This is situated at the lower end of the medium carbon risk band, suggesting that its current equity and/or bond holdings are moderately 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.