American Funds Mortgage Fund has several promising attributes that may appeal to sustainability-focused investors.
This fund has relatively low exposure to ESG risk compared with its peers in the US Fixed Income category, earning it the second highest Morningstar Sustainability Rating of 4 globes. 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.
American Funds Mortgage Fund has a Carbon Risk Score of 1.97, indicating portfolio companies face low carbon-related risks in the transition to a low-carbon economy. Currently, the fund's involvement in fossil fuels is negligible, and compares favorably with 0.57% for its average peer. No companies held by American Funds Mortgage Fund are recognized as being involved in controversies at a high or severe level. From bribery and corruption to workplace discrimination and environmental incidents, controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, controversies can damage the reputation of both companies themselves and their shareholders.
One potential issue for a sustainability-focused investor is that American Funds Mortgage Fund doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes.