Homestead Small Company Stock Fund has a number of attributes that may meet the expectations of sustainability-focused investors, despite some issues worthy of attention.
Homestead Small Company Stock 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 Small 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. Unlike impact, which measures positive environmental and societal outcomes attributable to an investment, ESG risk reflects the degree to which investments could be affected by material ESG issues like climate change and inequalities.
Currently, the fund's involvement in fossil fuels is negligible, and compares favorably with 6.75% for its average peer. The fund has no exposure to 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.
One potential issue for a sustainability-focused investor is that Homestead Small Company Stock Fund 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.
Homestead Small Company Stock Fund's Carbon Risk Score of 10.11 is at the lower end of the medium carbon risk band. This score represents the asset-weighted carbon risk score of the portfolio's equity or corporate bond holdings, averaged over the trailing 12 months. This suggests the fund’s current holdings are moderately positioned to transition to a low-carbon economy. Such funds invest in companies that tend to operate in sectors less exposed to the transition (such as healthcare and IT) and/or companies in more carbon-intensive sectors (such as industrials and utilities) but that consider climate change in their business strategy and products, and therefore are positively aligned with the transition.