Fidelity EUR Corp Bond Research Enhanced PAB UCITS ETF

Sustainable, Responsible &/or ESG Policy:

The fund considers that investment in a constituent of the benchmark is an investment in economic activities with an environmental objective (that do not qualify as environmentally sustainable under the EU Taxonomy) and therefore investment in a constituent of the benchmark is a sustainable investment. The fund will invest:

• A minimum of 90% of its assets in sustainable investments of which a minimum of 0% have an environmental objective which is aligned with the EU Taxonomy, a minimum of 90% have an environmental objective (which is not aligned with the EU Taxonomy) and a minimum of 0% have a social objective; and
• Not more than 10% of its assets (a) in securities that were previously constituents of the benchmark may be held for a transition period after they fall out of the benchmark in a manner appropriate to protect the best interests of investors and will then be divested; and (b) for liquidity, hedging and efficient portfolio management; provided that such investments do not significantly harm any other environmental and social objectives and that investee companies follow good governance practices.

As described above, in respect of its direct investments, the fund is also subject to: (a) a firm-wide exclusions list, which includes cluster munitions and anti-personnel landmines; and (b) a principle-based screening policy.

Consideration of the principal adverse impacts on sustainability factors of investment decisions (referred to as principal adverse impacts) is also incorporated into the fund through a variety of tools, including:

• Due diligence: Analysis of whether impacts on sustainability factors are material and negative.
• ESG rating: Fidelity references ESG ratings which incorporate consideration of material principal adverse impacts such as carbon emissions, employee safety and bribery and corruption, water management and, for sovereign issued securities, ratings used incorporate consideration of material principal adverse impacts such as carbon emissions, social violations and freedom of expression.
• Exclusions: When investing directly in corporate issuers, the fund applies the Exclusions (as defined above) to help mitigate the principal adverse impacts through excluding harmful sectors and prohibiting investment in issuers that breach international standards, such as the United Nations Global Compact.
• Engagement: Fidelity uses engagement as a tool to better understand principal adverse impacts and, in some circumstances, advocate for mitigating the principal adverse impacts. Fidelity participates in relevant individual and collaborative engagements that target a number of principal adverse impacts (such as, Climate Action 100+, Investors Against Slavery and Trafficking APAC).
• Voting: Fidelity’s Voting Policy includes explicit minimum standards for board gender diversity and engagement with climate change. Fidelity may also vote to help mitigate principal adverse impacts.
• Quarterly reviews: Monitoring of principal adverse impacts through the sub-fund’s quarterly review process.

Furthermore, the fund is a member of Fidelity's Sustainable Fund Family and has enhanced requirements in terms of its allocation to companies with strong ESG characteristics. A minimum of 70% of the fund’s net assets will be invested in securities that maintain sustainable characteristics. This typically consists of companies with MSCI ESG rating AAA-BBB or rated A-C by Fidelity for sustainability. Furthermore, the Portfolio Managers aim to improve on this profile by increasing the fund’s exposure to higher rated issuers and excluding issuers rated below a MSCI ESG BB rating and Fidelity ESG D stable rating.

Lastly, ESG integration is carried out at the fundamental research analyst level. Fidelity has developed an integrated ESG approach where ESG integration is carried out by the fundamental research analysts, primarily through the implementation of Fidelity’s proprietary ESG Rating framework. This rating framework was established in 2019 and is designed to generate a forward-looking and holistic assessment of a company’s ESG risks and opportunities, based on sector-specific key performance indicators across 130 individual and unique sub-sectors. In addition, the Portfolio Managers are also active in analyzing the effects of ESG factors when making investment decisions. The Portfolio Managers and analysts examine the business, customers and suppliers, and may often visit the companies in person to develop a view of every company in which we invest and ESG factors are embedded in this research process.

Process:

The fund is constructed systematically, within a prudent risk budget, driven by bottom-up issuer and bond selection informed by Fidelity credit and ESG analysis, and our proprietary multifactor model.

Our approach to Multifactor Credit investing

The fund delivers an actively managed sustainable corporate bond exposure by using our proprietary factor model to select and weight securities while capturing the key characteristics of the market. 

Our investment process is designed to maximise the:

• Advantages of our unique multifactor model.
• Impact of high-quality proprietary credit research.
• Precision in portfolio construction.
• Repeatability and consistency of successful performance outcomes.
• Overall cost-effectiveness of our investment solutions.

In 2020, our approach was awarded the title of ‘factor investing offering of the year’ at the European Pensions Awards, an industry event launched to recognise firms that ‘set the professional standards in order to best serve European pension funds’.

Defining the investable universe

The output of the factor construction and issuer selection process is a factor score for each issuer which is subsequently enriched by security selection at a later stage. The next step of the investment process is to define the investable universe.

We apply our internal Fidelity research inputs to screen the initial list of issuers, in terms of credit assessment (fundamental, outlook and relative value), equity assessment when relevant, internal ESG assessment, as well as the ESG outlook, and engagement activity. This step narrows the investment universe to companies where we have expressed a positive or at least a stable trajectory and takes into account other internal selection criteria, such as liquidity. It aims to enhance the predictability of cash-flow repayments and reduce turnover in the portfolio through filtering out issuers not seen as favourable by our research teams.

As part of the funds’ aim to deliver a portfolio with an enhanced sustainability profile, securities from certain sectors are not considered for inclusion as per the Fidelity ‘Sustainable Family’ exclusion list.

The fund excludes companies involved in the following activities: controversial weapons, semi-automatic weapons, conventional weapons, thermal coal and tobacco, as well as companies in violation of the 10 principles of the United Nations Global Compact Principles and may include other initiatives as defined by our third-party screening partner. 

Additionally, as part of the fund’s inclusion within the Fidelity Sustainable Fund Family range, a minimum 70% of the funds will be invested in securities that maintain favourable ESG characteristics. ESG characteristics may include, but are not limited to, governance and superior management of ESG issues.

Furthermore, the Portfolio Managers aim to improve on this profile by increasing the fund’s exposure to higher rated issuers and excluding issuers rated below a MSCI ESG BB rating and Fidelity ESG D stable rating.

More information can be found on our website at: https://professionals.fidelity.co.uk/sustainable-investing/our-approach/latest-reports-guides

The aim of the benchmark index is to track the performance of global investment grade corporate bonds denominated in Euro, UK sterling and US dollar and to align with a self-decarbonisation trajectory, as well as a minimum reduction in weighted average carbon intensity* versus the index provider’s market cap weighted index (the benchmark index).

At the launch, gross greenhouse gas emissions as well as greenhouse gas intensity of the index are reduced by a minimum of 50% compared to benchmark index. Throughout the life of the index the carbon emissions as well as the carbon intensity of the Index must always fulfil the self-decarbonisation trajectory as well as the 50% reduction against the benchmark index.

The self-decarbonisation trajectory is at least 7% annually. This is consistent with the decarbonisation trajectory from the Intergovernmental Panel on Climate Change (IPCC) 1.5 °C scenario and is defined by an annual minimum carbon intensity reduction of 7% compared to the carbon intensity of the Index on its base date (31 January 2020) in a geometric progression. The 7% annual reduction is split into two 3.5% semi-annual reductions which become effective at the end of January and end of July.

The indices also apply the following exclusions:

• Coal mining and coal power generation; >10% revenues from fossil fuel production, exploration, distribution and services.
• >50% revenues from electric power generation from fossil fuel sources.
• Companies with significant negative impact on one of SDGs 12-15.
• Tobacco cultivation and production.
• Controversial weapons.
• UNGC violators.

*’Weighted Average Carbon Intensity’: the sum of each index weight multiplied by the Co2e per US$ million of revenue of each holding. This metric provides a snapshot of the index exposure to carbon-intensive companies and includes scope 1 and scope 2 carbon emissions.

Portfolio construction

Portfolio construction is designed to maximise the strategy’s exposure to issuers with the best credit factors and bonds with the most attractive valuations. The outcome is a strategy that generates alpha from credit selection based on the proprietary multifactor model and sustainability assessment, while providing macro level exposures in line with the index.

Once the investable universe is defined, the Portfolio Managers design a precise risk budget which considers:

• Conservative limits on credit, duration, and curve exposures.
• Ratings concentration and dispersion constraints at country, sector and issuer level.
• Exclusions of issuers that demonstrate no ESG improvements.

Fidelity Optimus creates a suggested portfolio, and our Fidelity proprietary software offers the following benefits:

• Flexibility: The number, type and extent of risk budget and guidelines constraints and yield target will differ depending on the client needs and requirements and prevailing market environment. The risk budget communicated to Fidelity’s proprietary optimiser nuances the number of instruments and allocation to each security which helps the Portfolio Managers enhance the quality of the final solution.
• Calibrated: Specifically, to avoid unnecessary churning and transaction costs, based on estimated transaction costs from a proprietary model with 12 years of bond data. A high accuracy in estimating transaction costs is critical to delivering an optimal fixed income investment solution to clients in today’s low yield environment.
• Integrated risk management: The portfolio solution must comply with every single constraint, otherwise Fidelity Optimus indicates that ‘no solution’ is possible.
• Reliable and repeatable: A consistent outcome is available within or outside the software, given the same initial portfolio, universe of investment, turnover constraints and an identical target function.

Implementation

Efficient trading is vital for minimising the impact of portfolio implementation shortfall on the performance of fixed income funds, especially in today’s low yield environment. As a result, there is no straight-to-trade implementation of Fidelity Optimus recommendations within our investment process. The Portfolio Managers use their skill and experience, and work closely with the fixed income traders, to implement the final portfolio at the optimal time to achieve best execution, and realistic and acceptable turnover. The trading function is an integral part of the investment process and, in addition to ensuring best execution, traders provide a unique source of insight for refining fund positioning. Our multifactor investment process has performed particularly well in volatile markets given a broader dispersion of returns.

Derivatives

Derivatives may be used for the purpose of efficient portfolio management.

Resources, Affiliations & Corporate Strategies:

As an investment manager, we have a fiduciary duty to act in the best interests of our clients. In the context of sustainable investing, we have developed an approach with three key components (integration, stewardship, and solutions) that aim to provide our clients with investment offerings that meet their financial and non-financial objectives, and to comply with rapidly evolving sustainability regulations for product labelling and disclosure.

Fidelity’s sustainable investing approach is established on the foundation of our integration tools and processes. We believe ESG factors should be integrated into different investment processes. We have designed ratings and tools to identify the relevant risks and opportunities of issuers and established other processes to ensure that ESG factors are integrated consistently in our portfolios. We will also consider research insights from third-party data providers where relevant.

Our integration tools and processes also support the prioritisation of stewardship activities and the development of solutions that meet different regulatory requirements and client objectives. While sustainability ratings and scores allow for easier comparison of company performance, sustainability analysis should be both quantitative and qualitative and its findings should be interpreted in the context of financial performance to provide a holistic picture of a company’s performance.

Proprietary ratings and tools sit at the heart of Fidelity’s sustainable investing approach. They build on Fidelity’s heritage of fundamental research, the contribution from investment analysts and the expertise of the Sustainability Team. These tools include:

ESG Ratings: an assessment of management and mitigation of ESG risks

The Fidelity ESG Ratings aim to provide a forward-looking assessment of the extent to which an issuer’s performance on material sustainability issues either supports, or is likely to impair, long-term value creation for shareholders. The ratings are differentiated in their forward-looking emphasis and their use of issuer interaction and due diligence by Fidelity’s fundamental analysts as the main input to identify and assess the material ESG risks impacting an issuer. 

Our ESG Ratings are integrated into Fidelity’s investment process and are available to all members of the investment team on our internal research platform. Our rating serves as an additional source of insight and as a tool to support investment decisions.

Our ratings comprise a combination of E, S, and G indicators that aim to address the most material issues in each sector, providing a forward-looking view of an issuer’s ESG practices. The ratings’ methodology reflects the evolution of Fidelity’s ESG integration approach, founded on the principle of ‘double materiality’, focusing on ESG both from a business risk perspective and in terms of the environmental and societal implications of the issuer’s operations.

Four key principles underpin our ESG Ratings:

• Consideration of both non-financial and financial impacts ('double materiality'). A focus on absolute impacts allows comparison across sectors and geographies.
• Providing a forward-looking perspective that is complementary to our financial forecasts, helping to inform the long-term prospects of an individual issuer. 
• Consideration of material impact across more than 100 individual subsectors for a more focused and relevant set of indicators.
• Flexible output for different use cases. Individual E, S, and G scores provide guidance for determining an overall ESG score at the issuer level and trajectory ratings.

Our ESG Ratings framework is reviewed regularly to help identify the most material ESG factors for each sector. We aim to provide training on the ratings framework as it evolves and on specific themes and sectors to help enhance understanding of the material ESG factors required for analysis, and to enhance the quality and consistency of ratings. The in-depth nature of our approach means that our coverage is not as broad as a third-party provider, therefore we also use external research and rating providers, such as MSCI and Institutional Shareholder Services (ISS), to complement our internal research process and for the construction of our funds with specific sustainability objectives. Where possible and practical, we aim to use our own ESG ratings as a preferred data source for fundamental insight and measurement of product-level characteristics.

Climate Ratings: alignment to the outcome of net zero carbon emissions by 2050

Our Climate Ratings assess an issuer’s operational alignment to the objectives of the Paris Agreement, providing a holistic view of climate-related risks and opportunities.

To facilitate our assessment of an issuer’s net zero transition, we have developed a Climate Rating that assesses an issuer’s operational alignment to the objectives of the Paris Agreement (to limit global average temperature rise this century well below 2°C and to drive efforts to limit the temperature increase even further to 1.5°C above pre-industrial levels). The Climate Rating is designed to be used in conjunction with our other ESG and climate tools to provide a more holistic view of an issuer’s exposure to climate-related risks and opportunities. 

Assessment criteria cover three key areas: 

• Carbon emissions disclosure: This assessment focuses on disclosure of Scope 1, Scope 2 and material Scope 3 (based on the definition of the Greenhouse Gas (GHG) Protocol). 
• Emissions reduction targets: This assessment concentrates on the issuer’s current emissions, net zero GHG emissions ambitions, targets and carbon reduction targets. 
• Climate governance: This assessment analyses executive remuneration plans linked to climate ambitions; governance responsibilities for climate at executive level; and board committees with responsibility for oversight of climate change policies. 

For high impact sectors, additional criteria may be included to take into account the unique requirements of certain hard-to-abate sectors in relation to achieving net zero. The Climate Rating does not rely on a single climate change model or scenario. The assessment undertaken takes into account a wide range of data sources including companies’ disclosure, inputs from the Carbon Disclosure Project (CDP), ISS Climate data (e.g., Implied Temperature Rise), and the Science Based Targets initiative (SBTi).

SDG Tool: an assessment of positive contribution to the UN Sustainable Development Goals (SDGs)

Fidelity’s SDG Tool aims to provide an assessment of an issuer’s positive contribution to environmental and social outcomes. It is intended to complement Fidelity’s ESG Ratings which provide an assessment of an entity’s management of adverse impacts arising from ESG issues. The SDG Tool also supports Fidelity’s definition of ‘sustainable investments’ under Europe’s Sustainable Finance Disclosure Regulation (SFDR). We aim to provide a separate analysis of the positive and negative issues an issuer may be exposed to, to help prevent the signal value from identifying a risk being offset by an unrelated positive contribution (e.g., poor corporate governance and a catastrophic tailing-dam failure are not mitigated by selling products that help the energy transition).

Primary use cases for the output of the model are: 

• Issuer and entity-level assessment: The model provides an assessment of the percentage of an issuer’s revenue that contributes to each SDG. This can be used as an input to help define a thematic investment universe. 
• SFDR: Under SFDR, there is a requirement to identify issuers that make a positive contribution to an environmental or social outcome and can qualify as ‘sustainable investments’. The SDG Tool is a key input in this process. 
• Reporting: The SDG Tool provides the ability to report the contribution of a fund’s investments to the SDGs to our clients on a consistent and scalable basis

Quarterly Sustainability Reviews (QSR): an internal forum to review relevant quantitative and qualitative metrics and discuss sustainability integration in specific strategies

The QSR is a component of the Quarterly Fund Reviews (QFRs) which cover performance risk, liquidity, etc. The QSR is a quantitative and qualitative exploration of a product’s sustainability profile, and may include aspects such as ESG ratings, engagement activity, climate characteristics, impact indicators and other datapoints. Attendees may include representatives from the Sustainability Team, the asset class CIO, portfolio manager(s), and risk professionals. The discussion is supported by a data pack which draws together various ESG data sources. The targeted scope of QSRs is actively managed products with a higher level of ESG integration, which may include certain EU SFDR Article 8 and Article 9 products, and UK SDR Labelled and ESG Promoted (unlabelled) products. Products disclosing under SFDR Article 6 are not subject to the QSR process. SI-related investment mandates could be covered by QSR on an optional basis or at the request of clients.

Our integration tools and processes also support the prioritisation of stewardship activities and the development of solutions that meet different regulatory requirements and client objectives. Furthermore, we promote active ownership as the stewards of our clients’ assets, supporting real world sustainability outcomes that help us to fulfil our fiduciary duty. Effective and outcomes-focused stewardship combines bottom-up corporate engagement, top-down thematic engagement, and system-wide stewardship. This approach is essential to drive change and encourages regular engagement and dialogue which we believe is more efficient than exclusions because this simply diverts the problem elsewhere. We believe that monitoring the progress of engagements is as important as initiating them to assess change over time. The outcomes (or lack of outcomes) resulting from our engagements can be reflected by investment analysts in our ESG ratings and used to inform investment decisions. Our Voting Principles and Guidelines sets out our minimum expectations for our investee companies in key areas including climate change, deforestation, and gender diversity. 

For further details, please refer to our Sustainable Investing Principles sustainable-investing-principles.pdf. 

Sustainability Team

As an active bottom-up research house, we have always looked beyond financial reporting to gauge the value of an investment. This involves maintaining ongoing dialogue with investee companies, staying vigilant to the evolving regulatory landscape, and monitoring other factors that could influence sustainable cash flows over our investment horizon, including those currently categorised as ESG. We began formally integrating ESG considerations into our investment and research processes since becoming a signatory to the Principles for Responsible Investment in October 2012. 

As a logical consequence of our focus on sustainability, we established our Sustainability Team over a decade ago. Initially a small group based in London, the team has now grown to include 30* professionals with the global presence spanning London, Singapore, Tokyo, Hong Kong, Shanghai, Sydney and Luxembourg. Members of our Sustainability Team bring a diverse skill set, including expertise in research, climate science, and governance, with many boasting over a decade of experience.

*Source: Fidelity International, as at 31 December 2025.

The team’s scope now encompasses a wide range of activities related to ESG integration, engagement, policy, product development, sales and marketing, proxy voting as well as corporate sustainability. New members have contributed additional skills in legal and thematic areas, client and distribution expertise, and governance. 

The Sustainability Team functions across Fidelity in several ways:

• Collaborates closely with the broader investment team, supporting analysts in producing ESG research and conducting company-specific engagements, driving thematic engagement outcomes with sector analysts' input, and assisting portfolio managers in integrating ESG into their investment processes through proprietary tools, training, and frameworks.
• Works in tandem with the product team to develop sustainable investing frameworks and strategies in compliance with ESG regulations and tailored to diverse investor needs.
• Assists client-facing teams and clients with sustainable investing requirements and needs, including client communications, questionnaires, reporting, and training.

The team continues to evolve based on Fidelity's sustainable investing strategy, ensuring comprehensive support for all business areas and improving the quality and outcomes of engagement across asset classes.

Industry collaboration

Fidelity recognises the importance of networks and information platforms for sharing tools and pooling resources, using investor reporting as a source of learning. Our Sustainability Team keeps its current and potential membership of investor organisations under constant review. We monitor all international treaties, supranational organisations and other sustainability memberships to ensure we are up to date with market trends and to stay involved in the debate. We are proactive in strengthening our links within the investment industry, to determine effective ESG initiatives, maintain ethical standards, and attend seminars and conferences to integrate ESG into the investment process. Additionally, our Sustainability Team speaks publicly at industry events on responsible investment practices and promotes transparency in corporate governance issues. Please refer to the following list of our memberships, affiliations and signatories, listed by category:

Social Disparities

• 30% Club Australia (2021)
• 30% Club Hong Kong (2022)
• 30% Club Investors Group (2020)
• 30% Club Japan (2019)
• 40:40 Vision (2020)
• Armed Forces Covenant (2019)
• BBBA Talent Accelerator (2020)
• Business in the Community, Race at Work Charter (2020)
• Diversity Project (2017)
• DWP Disability Confident Scheme (2022)
• Find it, Fix it, Prevent it (CCLA) (2020)
• Global Business Collaboration Leadership Pledge (2022)
• If not now, then when? Campaign on Racial Diversity (2020)
• Investor Initiative on Human Rights Data (2024)
• Investors Against Slavery and Trafficking Asia-Pacific (2020)
• Investor Alliance for Human Rights (2025)
• Lord Mayor's Appeal - We Can Be (2019)
• LGBT Great (2019)
• Luxembourg National Diversity Charter (2020)
• Mental Health First Aid Training (2017)
• Minority Supplier Development UK (2020)
• Mindforward Alliance (2022)
• OutBritain (2022)
• President’s Challenge Enabling Employment Pledge and Enabling Mark (2023)
• PRI Reference Group on Human Rights and Social Issues (2025)
• Progress Together (2022)
• Purple Space (2019)
• Social Mobility Foundation (2021)
• Social Enterprise UK (2021)
• Stonewall (2016)
• Talent-Wise Employment Charter and Inclusive Organisations Recognition Scheme (2022)
• UN LGBTI Standards of Conduct in Business (2019)
• Valuable 500 (2019)
• Veteran-owned UK (2021)
• WEConnect International (2021)
• Women in Finance Charter (2017)
• WorkWell Leaders (2023)
• #10000 Black Interns (2020)

Climate Change:

• Asia Investor Group on Climate Change (2020)
• CDP - formerly Carbon Disclosure Project (2019)
• China Climate Engagement Initiative (2023)
• Climate Action 100+ (2019)
• Climate Bonds Initiative (2019)
• Coalition for Climate Resilient Investment (2019)
• Financial Services Development Council (2022)
• Global Standard on Responsible Corporate Climate Lobbying (2022)
• Green Finance Industry Taskforce Singapore (2020)
• Glasgow Financial Alliance for Net Zero (2021)
• Institutional Investors Group on Climate Change (2020)
• Investor Group on Climate Change (2021)
• Net Zero Asset Managers Initiative (NZAMI) (2020)
• One Planet Asset Manager Initiative (2021)
• Partnership for Carbon Accounting Financials (2022)
• Point Zero Carbon Programme (2022)
• Powering Past Coal Alliance (2021)
• Singapore Sustainable Finance Association (2024)
• Transition Pathway Initiative (2021)
• UK Sustainable Investment and Finance Association (2010)

Good Governance:

• Asia Securities Industry and Financial Markets Association (2015)
• Asian Corporate Governance Association (2004)
• Assogestioni (2007)
• Corporate Governance Forum (2009)
• European Sustainable Investment Forum (2017)
• European Public Real Estate Association (2023)
• Hong Kong Green Finance Association (2020)
• Hong Kong Principles of Responsible Ownership (2017)
• International Corporate Governance Network (2005)
• Investment Association (2010)
• Investor Agenda (2021)
• Investor Forum - UK (2014)
• Japanese Stewardship Code (2014)
• Principles for Responsible Investing (2012)
• Responsible Investment Association Australasia (2020)
• Taiwan Stock Exchange’s Stewardship Principles for Institutional Investors (2016)
• Transition Finance Council (2025)
• UK Stewardship Code (2010)
• World Benchmarking Alliance (2020)

Nature Loss:

• Ceres - Valuing Water Finance Initiative (2022)
• Farm Animal Investment Risk and Return (2020)
• Finance for Biodiversity Pledge (2021)
• Green Praxis Biodiversity (2022)
• Investor Policy Dialogue on Deforestation (2024)
• Natural Capital Investment Alliance (2021)
• Nature Action 100 (2023)
• Taskforce on Nature-related Financial Disclosures Forum (2021)
• Finance Sector Deforestation Action (2021)

SDR Labelling:

Not eligible to use label (out of scope)