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Ariel International Institutional AINIX Sustainability

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Sustainability Analysis

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Sustainable Summary

Ariel International Fund has a number of attributes that may meet the expectations of sustainability-focused investors, despite some issues worthy of attention.

This fund has a Morningstar Sustainability Rating of 5 globes, indicating that the ESG risk of holdings in its portfolio is rather low relative to those of its peers in the Morningstar Global Equity Large Cap category. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, such as climate change and inequalities, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.

Ariel International Fund has a Carbon Risk Score of 7.16, indicating portfolio companies face low carbon-related risks in the transition to a low-carbon economy. Currently, the fund has 11.08% involvement in fossil fuels, which compares favorably with 15.67% 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 Ariel International Fund doesn’t have an ESG-focused mandate. A fund with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with tobacco and small arms. Yet this goal is far from achieved, as the fund exhibits 7.23% and 0.6% exposure to tobacco and small arms, respectively. This compares with 0.68% and 0.84% for its average peer in the Global Equity Large Cap category.

The fund has a modest level of exposure (2.22%) to companies with high or severe controversies. Companies with high or severe controversies are involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose serious business risks to the company.

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.