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Vanguard Target Retirement Income Fund VTINX Sustainability

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Sustainability Analysis

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Sustainability Summary

Vanguard Target Retirement Income has a number of attributes that may meet the expectations of sustainability-focused investors, despite some issues worthy of attention.

This fund has relatively low exposure to ESG risk compared with its peers in the Target Date category, earning it the second highest Morningstar Sustainability Rating of 4 globes. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.

Vanguard Target Retirement Income has an asset-weighted Carbon Risk Score of 8.0, 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 Vanguard Target Retirement Income 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 8.9% involvement in fossil fuels, which is roughly in line with 9.6% 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 moderate exposure (6.83%) to companies with high or severe controversies. Controversies are incidents that have a negative impact on stakeholders or the environment, which create some degree of financial risk for the company. Examples of types of controversies include bribery and corruption scandals, workplace discrimination and environmental incidents. 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.

ESG Commitment Level Asset Manager