TIAA-CREF Large-Cap Value is likely to concern sustainability-focused investors given certain substandard ESG attributes.
The ESG risk of TIAA-CREF Large-Cap Value's holdings is comparable to its peers in the US Equity Large Cap Value category, thus earning an average Morningstar Sustainability Rating of 3 globes. Funds in the same category rated 4 or 5 globes tend to hold securities less exposed to ESG risk. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, such as climate change and inequalities, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.
One potential issue for a sustainability-focused investor is that TIAA-CREF Large-Cap Value 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 relatively high exposure (10.61%) to companies with high or severe controversies. From bribery and corruption to workplace discrimination and environmental incidents, controversies are incidents that may negatively affect stakeholders, the environment, or the company’s operations.
TIAA-CREF Large-Cap Value has an asset-weighted Carbon Risk Score of 10.84. This is situated at the lower end of the medium carbon risk band, suggesting that its current equity and/or bond holdings are moderately positioned to transition to a low-carbon economy. Investors concerned about the transition risks may prefer to consider funds with negligible or low carbon risk. Such funds invest in companies that tend to operate in sectors less exposed to the transition (such as healthcare and IT) and/or companies in more carbon-intensive sectors (such as industrials and utilities) but that consider climate change in their business strategy and products, and therefore are positively aligned with the transition. Currently, the fund has 14.35% involvement in fossil fuels, which is in line with peers in its category. Companies are considered involved in fossil fuels if they derive some revenue from thermal coal, oil, and gas.