The ESG risk of WisdomTree US LargeCap Dividend Fund's holdings is comparable to its peers in the US Equity Large Cap Value category, thus earning an average Morningstar Sustainability Rating of 3 globes. Funds in the same category rated 4 or 5 globes tend to hold 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, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance.
WisdomTree US LargeCap Dividend Fund has an asset-weighted Carbon Risk Score of 8.8, indicating that its companies 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.
One potential issue for a sustainability-focused investor is that WisdomTree US LargeCap Dividend 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.
Currently, the fund has 13.9% involvement in fossil fuels, which is roughly in line with 15.9% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. The fund has a modest level of exposure (7.77%) to companies with high or severe controversies. Companies with controversies are involved in incidents such as corruption, employee abuses, and that pose some degree of business risks to the company. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, they controversies can damage the reputation of both companies themselves and their shareholders.