Matthews China Fund has a number of attributes that may meet the expectations of sustainability-focused investors, despite some issues worthy of attention.
Matthews China Fund'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. 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.
The fund has an asset-weighted Carbon Risk Score of 9.98, indicating that its current equity and/or bond holdings 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. Currently, the fund's involvement in fossil fuels is negligible, and compares favorably with 5.45% for its average peer.
One potential issue for a sustainability-focused investor is that Matthews China Fund doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes.
The fund has a modest level of exposure (8.08%) 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.