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Federated Hermes US SMID Institutional FHUMX Sustainability

| Quantitative rating as of

Sustainability Analysis

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Sustainable Summary

Federated Hermes US SMID Fund may not appeal to sustainability-conscious investors.

Federated Hermes US SMID Fund has an average Morningstar Sustainability Rating of 3 globes, indicating that the ESG risk of holdings in its portfolio is similar to that of its peers in the US Equity Mid Cap category. Investors concerned about ESG risk may be better off with funds in the category that receive 4 or 5 globes, as they tend to invest in 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, 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.

Currently, the fund's involvement in fossil fuels is negligible, and compares favorably with 8.37% for its average peer.

One potential issue for a sustainability-focused investor is that Federated Hermes US SMID 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.

Federated Hermes US SMID Fund's asset-weighted Carbon Risk Score of 10.37 is at the lower end of the medium carbon risk band. This suggests the fund’s investee companies are adequately 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 (2.56%) 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.

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.