The ESG risk of Invesco EQQQ NASDAQ-100 ETF's holdings is comparable to its peers in the US Equity Large Cap Growth 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 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 key area of strength for Invesco EQQQ NASDAQ-100 ETF is its low Morningstar Portfolio Carbon Risk Score of 3.52 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.
A potential issue for a sustainability-focused investor is that Invesco EQQQ NASDAQ-100 ETF is not classified by its manager as Article 8 or Article 9 of the Sustainable Finance Disclosure Regulation. Funds classified by their managers as Article 8 or Article 9 either promote environmental or sustainable characteristics or have a sustainable investment strategy, respectively, and hence are more likely to drive positive ESG outcomes. The fund exhibits relatively high exposure (10.17%) 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.
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