This strategy has an above-average Morningstar Sustainability Rating of 4 globes, indicating that the ESG risk of holdings in its portfolio is relatively low compared with those of its peers in the Energy Sector Equity category. 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.
iShares Global Clean Energy ETF promotes ESG criteria within the meaning of Article 8 of the Sustainable Finance Disclosure Regulation. Funds in accordance with Article 8 or Article 9 are more likely to align with the expectations of an investor who cares about sustainability issues. iShares Global Clean Energy ETF has an asset-weighted Carbon Risk Score of 5.6, indicating that its companies have low exposure to carbon-related risks. These are risks associated with the transition to a low-carbon economy such as increased regulation, changing consumer preferences, technological advancements, and stranded assets. The fund's 87.2% involvement in carbon solutions is not only high in absolute terms, but also surpasses the 63.5% average involvement of its peers in the Sector Equity Alternative Energy category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. The fund aims to avoid, or limit exposure to, companies in violation with international norms, such as the UN Global Compact or the Universal Declaration of Human Rights.
No companies held by iShares Global Clean Energy ETF are recognized as being involved in controversies at a high or severe level. From bribery and corruption to workplace discrimination and environmental incidents, controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. 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.
Currently, the fund has 37.4% involvement in fossil fuels, which is high in both absolute and relative terms. The average peer in the same Sector Equity Alternative Energy category has 16.8% 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.
By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, tobacco, and and thermal coal. The fund mostly fulfills this goal; however, it does exhibit 0.17% exposure to companies involved in thermal coal. This compares with 1.87% for its average peer in the Energy Sector Equity category.
United States