Fidelity Investments is offering four new funds focused on environmental, social and governance criteria, including three mutual funds and an exchange-traded fund.
The Fidelity Sustainable International Equity Fund (FSYRX), Fidelity Sustainable Emerging Markets Equity Fund (FSYJX), Fidelity Sustainable Multi-Asset Fund (FYMRX), and Fidelity Sustainable High Yield ETF
will target companies with strong ESG ratings, according to the Boston-based asset manager.
“We’re constantly monitoring where companies are relative to another on their ESG journey,” said Pam Holding, co-head of equity and head of sustainable investing at Fidelity, in a phone interview. “These are actively-managed strategies.”
Fidelity will use a “proprietary reading” of how companies stack up in areas such as diversity, carbon emissions and cybersecurity by combining static ratings and a “forward-looking” view through quantitative and bottom-up, fundamental analysis, according to Holding. While the Fidelity Sustainable Multi-Asset Fund is “sort of a fund of funds that will use a combination of active and passive” investing, she said the other three new funds are “100% actively managed.”
The four new funds bring Fidelity’s total lineup of sustainable mutual funds and ETFs to 15.
The Fidelity Sustainable International Equity Fund, which focuses on developed markets, and the Fidelity Emerging Markets Equity Fund will invest in companies whose sustainability practices are proven or improving, according to a statement from the asset manager.
The Fidelity Sustainable High Yield ETF will invest in junk bonds of companies that Fidelity believes have proven or improving sustainability practices, as well as a low probability of default and potential for strong return. And the Fidelity Sustainable Multi-Asset Fund, which will invest in the firm’s actively-managed and index funds, is designed for investors who want diversification “with an emphasis on equities and long-term growth,” the firm said.
There will be no investment minimums to access the four new ESG funds, which individual investors and financial advisors can buy “commission-free” through Fidelity’s online brokerage platforms, according to the statement.
With respect to the “social” aspect of ESG, Holding said “we do a lot of proprietary work” looking at companies’ benefits plans and strategies for diversity, equity and inclusion. Fidelity looks for diversity of company boards and leadership, she said, as well as the composition of the broader workforce to the extent that data is available.
“A lot of these data sets are still emerging,” said Holding. Fidelity also engages company management teams to see how well they’re following through on their social programs, she said.
Under its ESG strategy, Holding said Fidelity is paying close attention to data privacy and cybersecurity. “We think that can be a key differentiator for a lot of companies,” she said.
Fidelity’s broader lineup of sustainable funds includes some that are focused on specific themes, such as the Fidelity Water Sustainability Fund
the Fidelity Climate Action Fund
and Fidelity Women’s Leadership ETF
The firm’s actively-managed Fidelity Sustainability U.S. Equity
ETF is down about 7% this year through Wednesday, according to FactSet. That compares with a drop of around 6% for the S&P 500 index
over the same period.