ClearBridge Small Cap Growth Fund has a number of attributes that may meet the expectations of sustainability-focused investors, despite some issues worthy of attention.
The ESG risk of ClearBridge Small Cap Growth Fund's holdings is comparable to its peers in the US Equity Small Cap category, thus earning an average Morningstar Sustainability Rating of 3 globes. Funds in the same category rated 4 or 5 globes 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.
The fund's current involvement in fossil fuels rests at 4.02%, which compares favorably with 5.34% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. The fund has no exposure to high or severe controversies. From bribery and corruption to workplace discrimination and environmental incidents, controversies are incidents that may negatively affect stakeholders, the environment, or the company’s operations.
One potential issue for a sustainability-focused investor is that ClearBridge Small Cap Growth Fund doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate are more likely to align with the expectations of an investor who cares about sustainability issues.
ClearBridge Small Cap Growth Fund's Carbon Risk Score of 11.55 is at the lower end of the medium carbon risk band. This score represents the asset-weighted carbon risk score of the portfolio's equity or corporate bond holdings, averaged over the trailing 12 months. This suggests the fund’s current holdings are moderately positioned to transition to a low-carbon economy. Such 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.