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Putnam Dynamic Asset Allocation Bal Y PABYX Sustainability

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Sustainability Analysis

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Sustainability Summary

Putnam Dynamic Asset Allocation Bal Fund may not appeal to sustainability-conscious investors.

Putnam Dynamic Asset Allocation Bal Fund has an average Morningstar Sustainability Rating of 3 globes, indicating that the ESG risk of holdings in its portfolio is similar to that of its peers in the Moderate Allocation category. Funds with 4 or 5 globes tend to hold securities that are 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.

Putnam Dynamic Asset Allocation Bal Fund has an asset-weighted Carbon Risk Score of 7.3, 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. The fund's current involvement in fossil fuels rests at 8.2%, which compares favorably with 11.2% 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 Putnam Dynamic Asset Allocation Bal 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 exhibits relatively high exposure (9.60%) to companies with high or severe controversies. Companies with controversies may be involved in incidents such as corruption, employee abuses, and environmental incidents that have a negative impact on stakeholders or the environment. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, they can damage the reputation of both companies themselves and their shareholders.

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