The ESG risk of BlackRock LifePath® Index 2025 Fund's holdings is comparable to its peers in the Target Date 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. 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.
The fund has an asset-weighted Carbon Risk Score of 8.10, 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 has 6.76% involvement in fossil fuels, which compares favorably with 7.75% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.
One potential issue for a sustainability-focused investor is that BlackRock LifePath® Index 2025 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 (6.47%) 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.