Skip to Content

Western Asset Inflation Idxd Plus Bd IS WAFSX Sustainability

| Medalist Rating as of | See Franklin Templeton Investment Hub

Sustainability Analysis

Author Image

Sustainability Summary

Western Asset Inflation Idxed Plus Bd Fd may not appeal to sustainability-conscious investors.

Western Asset Inflation Idxed Plus Bd Fd's holdings are exposed to average levels of ESG risk relative to those of its peers in the US Fixed Income category, thus earning it an average Morningstar Sustainability Rating of 3 globes. Competing funds in the category with ratings of 4 or 5 globes have less ESG risk in their holdings. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.

One potential issue for a sustainability-focused investor is that Western Asset Inflation Idxed Plus Bd Fd doesn’t have an ESG-focused mandate. A fund with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. One area to watch is the fund’s carbon risk exposure. Its Carbon Risk Score of 26.06 is situated at the higher end of the medium carbon risk band, indicating the fund's investee companies are in a vulnerable position in the transition to a low-carbon economy. The score represented the asset-weighted Carbon Risk Score of the portfolio's equity or corporate bond holdings, averaged over the trailing 12 months.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. Currently, the fund has 58.5% involvement in fossil fuels, which is high in both absolute and relative terms. The average peer in the same Inflation-protected Bond category has 1.8% exposure to fossil fuel-related businesses. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas. The fund exhibits relatively high exposure (10.23%) to companies with high or severe controversies. Companies with controversies may be involved in incidents such as corruption, employee abuses, and environmental incidents that have a negative impact on stakeholders or the environment. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, they can damage the reputation of both companies themselves and their shareholders.

ESG Commitment Level Asset Manager