This fund has above-average exposure to ESG risk relative to its peers in the Target Date category, earning it the second-lowest Morningstar Sustainability Rating of 2 globes. Investors concerned about ESG risk may be better off with funds earning 4 or 5 globes, as they tend to hold securities less exposed to ESG risk. ESG risk measures the degree to which material environmental, social, and governance issues, such as climate change and inequalities, could affect valuations. ESG risk differs from impact, which is about driving positive environmental and social outcomes for society’s benefit.
One potential issue for a sustainability-focused investor is that Fidelity Freedom® 2050 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. The fund's current involvement in fossil fuels reaches 9.12%, surpassing 7.88% 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 exhibits relatively high exposure (9.72%) to companies with high or severe controversies. Companies with high or severe controversies may be involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose serious business risks to the company.
The fund has an asset-weighted Carbon Risk Score of 9.85, 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.