TIAA-CREF Core Bond 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 US Fixed Income 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.
TIAA-CREF Core Bond Fund has an asset-weighted Carbon Risk Score of 7.5, 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 TIAA-CREF Core Bond 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. Currently, the fund has 9.7% involvement in fossil fuels, surpassing 7.1% 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 has a modest level of exposure (6.28%) to companies with high or severe controversies. Companies with controversies are involved in incidents such as corruption, employee abuses, and 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. In addition, they controversies can damage the reputation of both companies themselves and their shareholders.