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Franklin Mutual Financial Services Z TEFAX Sustainability

| Quantitative rating as of

Sustainability Analysis

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Sustainable Summary

Franklin Mutual Financial Services 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 Franklin Mutual Financial Services Fund's holdings is comparable to its peers in the Financials Sector Equity 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.

One key area of strength for Franklin Mutual Financial Services Fund is its low Morningstar Portfolio Carbon Risk Score of 8.45 and very low fossil fuel exposure 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. Currently, the fund's involvement in fossil fuels is negligible, and compares favorably with 2.88% for its average peer.

One potential issue for a sustainability-focused investor is that Franklin Mutual Financial Services Fund doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. The fund has relatively high exposure (9.43%) to companies with 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.

ESG Commitment Level Asset Manager

An ESG Commitment Level Asset Manager rating is not assigned to this investment.

Morningstar analysts award an ESG Commitment Level Asset Manager ratings to investments that also receive Morningstar Analyst Ratings. Not all investments currently have Asset Manager rating. Morningstar is expanding its coverage, prioritizing investments that are most relevant to investors.