MFS Blended Research Core Equity Fund's holdings are exposed to average levels of ESG risk relative to those of its peers in the US Equity Large Cap Blend category, thus earning it an average Morningstar Sustainability Rating of 3 globes. Competing funds in the category with ratings of 4 or 5 globes have less ESG risk in their holdings. ESG risk measures the degree to which material environmental, social, and governance issues, such as climate change, biodiversity, human capital, as well as bribery and corruption, could affect valuations. ESG risk differs from impact, which is about driving positive environmental and social outcomes for society’s benefit.
MFS Blended Research Core Equity Fund has an asset-weighted Carbon Risk Score of 6.5, 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 MFS Blended Research Core Equity Fund doesn’t have an ESG-focused mandate. A fund with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes. The fund has significant exposure (13.22%) to companies with high or severe controversies. Companies with controversies may be involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals 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. Such controversies can also damage the reputation of both companies themselves and their shareholders.
Currently, the fund has 9.2% involvement in fossil fuels, which is roughly in line with 8.5% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.