Xtrackers MSCI All China Equity ETF may not appeal to sustainability-conscious investors.
Xtrackers MSCI All China Equity ETF's holdings are exposed to average levels of ESG risk relative to those of its peers in the Greater China Equity 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 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.
The fund's current involvement in fossil fuels rests at 5.05%, which compares favorably with 5.45% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.
One potential issue for a sustainability-focused investor is that Xtrackers MSCI All China Equity ETF doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate are more likely to align with the expectations of an investor who cares about sustainability issues.
Xtrackers MSCI All China Equity ETF has an asset-weighted Carbon Risk Score of 13.31. This is situated at the lower end of the medium carbon risk band, suggesting that its current equity and/or bond holdings are moderately positioned to transition to a low-carbon economy. 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 (6.60%) 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.