This fund has relatively low exposure to ESG risk compared with its peers in the Aggressive Allocation 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.
iShares ESG Aware Aggressive Allc ETF has a sustainability or 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. iShares ESG Aware Aggressive Allc ETF has an asset-weighted Carbon Risk Score of 6.9, 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 7.4%, which compares favorably with 10.7% for its average category peer. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas. Ishares Esg Aware Aggressive Allc Etf shows 14.1% involvement in carbon solutions. This percentage surpasses the 11.3% average involvement of its peers in the Moderately Aggressive Allocation category. Carbon solutions include products and services related to renewable energy, energy efficiency, green buildings, green transportation, and so on.
By prospectus, the fund aims to avoid, or limit its exposure to, companies associated with controversial weapons, tobacco, thermal coal, and and small arms. Yet this goal is far from achieved, as the fund exhibits 1.03% and 0.6% exposure to controversial weapons and small arms, respectively. This compares with 0.62% and 0.61% for its average peer in the Aggressive Allocation category.
The fund exhibits moderate exposure (6.72%) 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.