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Third Avenue Value Instl TAVFX Sustainability

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Sustainability Analysis

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Sustainability Summary

Third Avenue Value Fund may not appeal to sustainability-conscious investors.

This fund lands in the 10% of strategies with the highest ESG risk in the Global Equity Mid/Small Cap category, earning it the lowest Morningstar Sustainability Rating of 1 globe. Funds with 4 or 5 globes tend to hold securities that are less exposed to ESG risk. ESG risk measures the degree to which material environmental, social, and governance issues, such as climate change, biodiversity, human capital, as well as bribery and corruption, 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 Third Avenue Value 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. Currently, the fund has 34.4% involvement in fossil fuels, which is high in both absolute and relative terms. The fossil fuel involvement of funds in the same Global Small/mid Stock category averages 8.4%. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas.

Third Avenue Value Fund has a 12-month asset-weighted Carbon Risk Score of 18.2. This is situated at the lower end of the medium carbon risk band, suggesting that its portfolio holdings are not among the worst-positioned to transition to a low-carbon economy, but they are not among the best-positioned either. 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. The fund exhibits moderate exposure (4.08%) to companies with high or severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. Such controversies can also damage the reputation of both companies themselves and their shareholders.

ESG Commitment Level Asset Manager