Royce Small-Cap Value Fund has a number of positive attributes that a sustainability-focused investor may find appealing.
This fund lands in the 10% of strategies with the lowest ESG risk in the US Equity Small Cap category, earning it the highest Morningstar Sustainability Rating of 5 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.
One key area of strength for Royce Small-Cap Value Fund is its low Morningstar Portfolio Carbon Risk Score of 9.82 and low fossil fuel exposure of 4.48% over the past 12 months, which earns it the Morningstar Low Carbon Designation. Thus, the companies held in the portfolio are in general alignment with the transition to a low-carbon economy. No companies held by Royce Small-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.
One potential issue for a sustainability-focused investor is that Royce Small-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.