Sustainable, Responsible &/or ESG Policy:

Investment opportunity

The Sustainable Multi Asset Fund Range is part of the Fidelity SFF range of funds, which is backed by our worldwide proprietary integrated fundamental and sustainable research.

We understand the need for greater transparency on ESG and so we apply a consistent approach across asset classes and provide detailed ESG exposures information for our funds. We are also committed to further enhancing the quality of reporting.

Recognising the importance of active engagement, we design our engagement to capture how well a company proactively manages sustainability issues that are the most material to its business. This helps us to distinguish companies which are following best practice and the laggards.

Investment objective

The Fidelity Sustainable Multi Asset Fund Range offers clients the opportunity to invest in a sustainable future while generating long-term capital growth utilising a cost-efficient approach.

The objective of the range is to increase the value of investments over a typical market cycle of five-to seven-years. Lead Portfolio Manager, Caroline Shaw, and Co-Portfolio Manager, Ayesha Akbar, aim to primarily invest in funds managed by Fidelity that have ‘good’ sustainable characteristics.

The range consists of three risk-controlled solutions: 'conservative', 'balanced' and 'growth'. The funds have carefully constructed strategic asset allocations which aims to help to deliver long-term growth for a given level of risk. It also helps to set reasonable expectations for their behaviour and to deliver consistent returns over the long term.

The range will be actively allocated to quality sustainable investment strategies across asset classes and geographies, based on their potential to generate growth using our sustainable approach. They are backed by Fidelity’s proprietary fundamental and sustainable research, as well as the ESG integrated investment process in Fidelity solutions and multi asset. To gain exposure to markets, the range primarily invests in Fidelity managed funds from our active and systematic sustainable capability, offering a transparent approach with efficient access to sustainable companies at a compelling cost. Each of the funds offers a different level of risk-return, distinguished by the balance between two broad asset class groups: equities and fixed income assets.

Exposure to these asset classes will consist mainly of actively managed Fidelity strategies combining sustainable and systematic capabilities, but the range will also look to invest in strategies managed by other portfolio managers such as closed-ended listed alternatives funds. The majority of the funds’ exposure will come from Fidelity’s SFF range of funds, which is a cross-asset range of funds with strict sustainable investing guidelines. The investment universe is driven by selecting issuers with strong and/or improving sustainable characteristics, whilst aiming to achieve compelling long-term financial performance and outperformance of their relative peer groups.

There are three categories of funds in Fidelity’s SFF range of funds:

• The best-in-class category invests only in the top performers on sustainability within a sector.
• The sustainable thematic category uses an approach that contributes to addressing sustainability challenges or creating a positive value-add to society and the environment.
• The Sustainable Research Enhanced Exchange Traded Funds (ETFs) are tilted towards issuers with positive sustainable characteristics with the objective of showing positive skews towards high ESG ratings: MSCI rating AAA –BBB (developed markets) or AAA to BB (emerging markets), Fidelity’s proprietary ESG Rating A to C.

The Fidelity Sustainable Multi Asset Fund Range will take exposure only to those active managers and instruments which meet our ESG research criteria which includes understanding the approach taken to ESG as part of the idea generation and portfolio construction process as well as the overall corporate approach to sustainability. The range does not use equity index future contracts given sustainability concerns.

• Any exposure should adhere to the SFF range of funds’ exclusion criteria on a look-through basis, both Fidelity and third-party strategies, active or passive.
• Sustainable multi asset strategies using primarily Fidelity exposure should invest in at least 70% in strategies aligned to the Fidelity SFF rules, with sovereign and cash exposure counted in this weight.
• The remaining exposure should be aligned to Fidelity’s Sustainable Finance Disclosure Regulation (SFDR) Article 8 non-SFF criteria. Specific criteria for third-party exposure (except sovereign and cash) apply.
• Considered to have ‘good’ ESG characteristics are sovereigns with MSCI ESG ratings from AAA to BBB for developed markets and AAA to BB for emerging markets.
• Engagement takes place at strategy level through the Solutions and Multi Asset's Manager Research Team.
• Third-party active strategies focused on traditional asset classes (for example, equity, fixed income): need a minimum ESG rating of B from the Solutions and Multi Asset Manager Research Team.
• Third-party passive strategies focused on traditional asset classes will be assessed based on the index methodology.
• Third-party non-equity or fixed income strategies including but not limited to alternatives, commodities and real estate, need an ESG rating of C or above from the Solutions and Multi Asset Manager Research Team.
• Impact multi asset funds can only invest in strategies with an ESG A rating from the Solutions and Multi Asset Manager Research Team.

The funds within the SFF range of funds are subject to the SFF range of funds exclusion framework which sets out the basis upon which certain issuers may be excluded from the investment universe of the SFF range of funds.

Firmwide exclusion:

• We adopt a principles-based approach to ESG matters and as part of this we place companies which we regard as unsuitable investments on an exclusion list.
• When deciding to exclude a company, we are guided by international conventions.
• The Convention on Cluster Munitions, the International Convention on the Prohibition of the use of, stockpiling, production and transfer of anti-personnel mines, guidance from The United Nations.
• The World Bank and other global regulations which uphold ESG principles.

Equity and corporate bond issuers may be excluded from the SFF for two reasons:

Behavioural exclusions

For failure to conduct their business in accordance with accepted international norms (behavioural exclusions) for example, issuers which fail to behave in a way which meets their fundamental responsibilities as aligned with international norms such as the United Nations Global Compact (UNGC).

Fundamental exclusions

For their involvement in activities or product categories which are unsustainable and cause significant harm (fundamental exclusions) for example, issuers within certain single product categories or industries which are fundamentally unsustainable@

• Tobacco: All tobacco producers and distributers/retailers/suppliers/licensors with more than 5% of the revenues coming from tobacco sales.
• Controversial weapons: All controversial weapons manufacturers intended use components, exclusive delivery platforms and smart weapons.
• Semi-automatic weapons: All manufacturers and retailers with more than 5% of the revenues coming from the sale of semi-automatic firearms.
• Thermal coal: All issuers that derive more than 5% revenue from the mining of thermal coal and its sale to third parties, and issuers that derive more than 5% revenue from thermal coal-based power generation. We will allow an exception to this exclusion if an issuer has less than 30% revenue from thermal coal related activities and if the following applies: The issuer’s revenue share from renewable energy exceeds revenue share from thermal coal activities. Where the issuer has made an effective commitment to a Paris Agreement aligned objective based on approved Science Based Targets or alignment with a Transition Pathway Initiative scenario or a reasonably equivalent public commitment. Evidence of company engagement and/or commitment must be logged in the ESG engagement section of the ESG Rating App.
• Conventional weapons: All issuers that derive more than 5% revenue from the production of conventional weapons.

Sovereign exclusions

Sovereign holdings are also subject to an exclusion framework based on three principles relating to a country’s public governance, respect for basic human rights and foreign policy for example, issuers that fail to comply or behave in line with the principles of public governance, human rights and foreign affairs.

Process:

Investment Process

The investment process is designed to ensure a well-diversified portfolio across asset classes, capital structure, instruments and a range of uncorrelated sources of income and returns with good sustainability characteristics. It seeks to achieve a balance between capital growth and effective risk management at all stages of the investment process with the aim to deliver consistently on objectives of long-term capital growth.

At the centre of our investment approach is Fidelity’s fundamental and sustainable research. The range leverages Fidelity’s extensive proprietary research from across the firm including our equity, fixed income and real estate teams. Acknowledging the significance of sustainability factors to social, environmental and long-term investment outcomes, we incorporate ESG factors throughout the entire investment process, which is underpinned by three basic principles:

• Screening is driven by selecting securities across both corporate and sovereigns that maintain ‘good’ ESG characteristics. for example, defined by the exposure to sustainability ratings.
• Engagement through our firmwide research process allows us to engage over the long-term and target meaningful improvements with companies. This also takes place at the strategy level through our strategy and instrument research process.
• Integration at the fund level ensures at least 70% is invested in strategies aligned to Fidelity’s SFF range of fund rules. The remaining exposure should be aligned to Fidelity’s SFDR Article 8 non-SFF criteria.

The investment process is backed by Fidelity’s research capabilities, including our proprietary sustainable and fundamental research, as well as Fidelity Solutions and Multi Asset’s expertise in asset allocation, strategy and instrument selection, portfolio construction and risk management. Fidelity’s ESG ratings leverage our extensive research capabilities and ongoing engagement to provide a forward-looking evaluation of a company’s focus and trajectory on ESG-related issues. This helps to distinguish companies with strong sustainable characteristics and potential to compel long-term financial performance.

The funds invest primarily in active and systematic managed Fidelity strategies, blended alongside exposure to sustainable alternative strategies such as property, infrastructure and renewable energy to achieve its investment objectives. Before implementation in the portfolios, each underlying investment vehicle passes through Fidelity Solutions and Multi Asset’s strategy and instrument research process. In general, Caroline and Ayesha will look to invest in strategies with good sustainable characteristics and the ability to generate capital, with the potential to select across a range of strategies with different style exposures in each asset class.

Strategic asset allocation

The funds in the range have carefully constructed strategic asset allocations which aims to help to deliver long-term growth for a given level of risk. They have been designed to provide investors with specific choice of funds with varying levels of risk. It also helps to set reasonable expectations for their behaviour and to deliver consistent returns over the long term.

They have been designed and optimised by a team of specialists at Hymans Robertson in conjunction with Fidelity, based on rigorous research into the long-term behaviour of asset classes, including their relationships with each other and how they behave through time.

Whilst the funds are not managed relative to a benchmark, we use Investment Association (IA) sector peer groups when judging the performance of the funds. The funds will be managed to deliver specific outcomes for clients but also in accordance with their IA sector peer groups, allowing for flexibility to allocate between different asset classes.

Tactical Asset Allocation (TAA)

TAA aims to add value and manage risk in portfolios through adjusting asset allocation incrementally in response to changing market conditions. We believe that markets can often fail to recognise significant events, and can overreact to ‘noise’, so an effective TAA process can help capture emerging opportunities and avoid shorter-term risks.

Our approach to TAA is based on combining a wide range of quantitative and qualitative inputs to create a diversified pool of tactical investment ideas. From broad macroeconomic analysis generated by Fidelity’s Global Macro and Strategic Asset Allocation (SAA) Team, to the insights of experienced portfolio managers, to on-the-ground research from Fidelity’s extensive global platform, our process combines a breadth of perspectives to generate ideas. We believe this diverse range of inputs is important to manage risk, and that an effective team-based approach is built on robust debate, challenge and accountability.

Within this team-based approach, we recognise the importance of active decision-making, and our strategies draw on the significant experience and expertise of Caroline and Ayesha. The team also considers issues of sustainability in the asset allocation process, using a broad framework to assess opportunities which includes ESG risk factors and dynamics in sustainability. The output of the tactical asset allocation process is a common pool of tactical ideas for Caroline and Ayesha to draw on in respective investment strategies. In practice, the team maintains a set of core investment views spanning major asset classes, global regions and currencies, which is updated on an ongoing basis as market conditions evolve. Alongside these core views, they generate complementary ideas for tactical positions in the form of pair trades or other diversified strategies. These tactical views are applied according to the parameters of each strategy.

Strategy and instrument research

Strategy and instrument research are a rigorous process combining quantitative and qualitative analysis to assess a broad universe of investment strategies. Our experienced and well-resourced team of analysts uses this repeatable process to generate recommendations of funds, strategies and instruments. Recommendations are discussed and debated in a range of forums and are subject to ongoing due diligence. Based on this, they are used by Caroline and Ayesha to access markets in their portfolios.

Once the research into a strategy has taken place, analyst recommendations are made which propose ideas for Caroline and Ayesha to access markets. Detailed research notes on each investment recommendation are published and updated regularly, as well as analyst ratings ranging from strong buy to strong sell, reflecting their conviction level. Model portfolios are built to provide style-neutral exposure, another way in which ideas are shared across the Investment Team. Once recommendations are made, each investment recommendation is presented to the team and debated. We consider this an important part of the process as it provides an independent assessment of all investment proposals, with input from our diverse team, ensuring broad-based discussion. After a recommendation has been presented, the strategy requires further review by Fidelity Solutions and Multi Asset’s Operational Due Diligence Team and Fidelity’s Legal and Compliance departments prior to an investment.

Each underlying strategy is subject to ongoing discussion and review, as well as regular monitoring. Our analysts regularly meet each active manager, conducting due diligence into each aspect of their strategy. The team monitors for changes including organisational structures, changes to investment process and ongoing risks associated with each strategy. Our analysts publish internal research notes to ensure that information is effectively communicated and accessible across the team. We aim to be invested for the long term, but a strategy may be sold at any point if, for example, we lose conviction in the manager’s ability to deliver consistent value, we believe that the strategy has drifted away from its stated approach and objectives, or we identify another strategy which we believe has superior potential for long-term investment returns. Overall, our process is highly iterative and involves ongoing analysis, as well as robust governance and oversight, which we believe is important in selecting the optimal strategies and instruments for implementing investment views.

Analysing sustainability in underlying strategies

As with many elements of research, evaluating the integration of sustainability in underlying strategies requires an iterative approach. There is no single ‘correct’ way to identify the sustainability of a strategy, and our team uses a range of approaches to build an overall picture. Both quantitative and qualitative methods of analysis have roles to play here, each bringing their own strengths and weaknesses.

For example, one line of enquiry might be to aggregate the sustainability metrics of underlying securities to determine a portfolio’s overall ESG profile. In this way, we might derive an average ESG score or a distribution of ESG scores for a portfolio’s constituents. As a quant-driven approach, this has strengths in automation and consistency. However, aggregating holdings-level scores risks doing little more than describing a fund’s style, its holdings’ market cap, and its geographic focus. For example, we might expect strong security-level ESG scores amongst growth equity strategies, where the fund manager invests in corporates with low capital intensity and, therefore, typically lower carbon footprints. Second, an aggregate quantitative score would not tell us if the overall rating is the result of a sustainable investing process, or simply a coincidence based on the investment universe. However, this is important information when building evidence of a strategy’s sustainability.

If a strategy’s holdings-level scores are the result of deliberate, sustainable investment philosophy, we might be confident that the ratings profile will remain consistent in the future. On the other hand, if a strategy’s holdings-level scores are the result of purely economic views, an investment algorithm, or mere coincidence, we should be alert to rapid potential change in the portfolio’s overall ESG profile. For example, a fund manager might acquire several growth stocks, which have high ESG ratings, to express a view on interest rates. This would score highly on a quantitative, aggregate basis. Yet, as the portfolio construction is independent of ESG research, we would have limited confidence that the portfolio’s aggregate ESG score will be constant or improve. Rather, it is likely to change with interest rates, as the portfolio manager rotates their holdings.

As a result, it is helpful to go one step further in evaluating the sustainability of strategies and managers across the investment industry. We can combine a quantitative approach with an analyst-led, qualitative assessment of a manager’s security selection process. This approach is useful because it links holdings-level characteristics to the investment decisions being made by the manager. By speaking directly to portfolio managers, we also ensure our ESG analysis is forward-looking. We can anticipate changes in sustainable investing processes, whether for better or worse, and build investment recommendations around the strategy’s direction of travel, and not just its recent history. Indeed, we believe that the direction of travel for a strategy is just as important as its current sustainability profile, and our team monitors these dynamics closely.

As set out above, there are a number of ways to assess the sustainability of a strategy, and we believe that the best approach considers both Caroline and Ayesha’s investment process and the ESG risks of its holdings. Through qualitative and quantitative assessment, solutions and multi asset analysts propose a peer-relative sustainability score and investment action, based on the managers’ ability to add value through navigation of ESG risks and opportunities. Our intention is to assess the integration of ESG analysis with the investment process, which means cross-checking policy with practice. Strategies are scored relative to a core benchmark and we do not apply a normal distribution to our scores, although our framework sets out some objective distinctions between high and low ratings. Our ESG framework analyses the quality of ESG research and the degree of integration with security valuation, buy and sell recommendations, and portfolio construction, which can be evaluated across investment styles.

Broadly, we consider four key pillars when evaluating a strategy:

• The investment policy.
• The integration of ESG research with the investment process.
• The quantitative ESG profile of the portfolio.
• The quality of the investment manager’s engagement with companies, issuers, and investments.

Managers are assigned a proprietary rating from A to E against each pillar, which are combined to generate a final score. This structured and repeatable approach was developed by our Manager Research analysts, with support from Fidelity’s centralised ESG specialists. Our dedicated portfolio analytics colleagues ensure our analysts can leverage holdings-level ESG scores, including Fidelity’s proprietary equity and fixed income ESG ratings, as well as MSCI, Institutional Shareholder Services (ISS) and other third-party data. Understanding the sustainability of strategies requires significant resources and support, so Fidelity’s well-equipped teams, with access to the appropriate data sets, provide important input into our team’s research.

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)

Dialshifter

This fund is helping to ‘shift the dial from brown to green’ by…

Giving preference to investing in issuers that are more environment friendly vis-à-vis their products/the impact of their operations on the environment and excluding all issuers that derive more than 5% revenue from the mining of thermal coal and its sale to third parties, and issuers that derive more than 5% revenue from thermal coal-based power generation.*

*Subject to exceptions mentioned in the answer to the next question.

SDR Labelling:

Sustainability Mixed Goals label

SDR Literature:

• Consumer Facing Disclosure