This strategy holds securities with low exposure to ESG risk relative to those of its peers in the Morningstar US Equity Large Cap Value category, earning it the highest Morningstar Sustainability Rating of 5 globes. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.
Based on its latest prospectus, sustainability or ESG factors are a focus in the investment process of Baywood Socially Responsible Fund. Funds with ESG-focused mandates are more likely to deliver positive sustainability outcomes. Baywood Socially Responsible Fund has an asset-weighted Carbon Risk Score of 8.2, 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. Baywood Socially Responsible Fund shows 10.1% involvement in carbon solutions. This percentage surpasses the 7.6% average involvement of its peers in the Large Value category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on. By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, tobacco, and and small arms. The fund fulfills this goal as its investment exposure to each of these activities is negligible.
Currently, the fund has 19.4% involvement in fossil fuels, surpassing 15.7% for the average peer in its category. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.
The fund exhibits moderate exposure (4.05%) to companies with high or severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. Such controversies can also damage the reputation of both companies themselves and their shareholders.
United States