Sustainable, Responsible &/or ESG Policy:

The product is a pure-play in water and waste management and seeks to actively engage with companies on ESG issues with continued impact monitoring. Ultimately, the fund believes that by investing in companies with a strong sustainability profile, the fund can generate a positive impact for its investors, but also the wider global economy.

The fund follows a sustainable thematic investment objective, with 100% of NAV (ex-cash and hedging) invested in securities which contribute to a sustainable theme (sustainable water and waste).

Implementation of ESG in screening and in research process

The fund incorporates a comprehensive ESG framework including all ESG factors when analysing companies that are considered to become part of the portfolio.

ESG is integrated at each step of the investment process of the fund. To start with, all ESG considerations are firmly embedded into Fidelity’s proprietary fundamental research output and into the strategy investment process. We have a Proprietary ESG Rating leveraging equity and fixed income research and interactions with companies. Our analysts look to identify situations where ESG issues have the potential to create unanticipated risks that destroy value or delay an investment thesis from playing out. The stock selection process involves both financial and ESG analysis when researching companies. ESG is incorporated in the sell discipline process as well with the Portfolio Managers examining all ESG downgrades in detail. The fund assesses the ESG characteristics of at least 90% of its assets. The fund’s investment universe is reduced by at least 20% due to the exclusion of issuers based on their ESG characteristics.

Thematic ESG approach explained

The fund follows a thematic ESG approach. Within the bespoke water and waste investment universe, the companies selected are those with strong and improving ESG characteristics. This approach aims to achieve compelling long-term financial performance and outperformance of its benchmarks. 100% of NAV (ex-cash and hedging) should be aligned with the selected sustainable theme. For monitoring purposes, thematic purity of >80% of NAV aligned with the theme will be monitored as a binding threshold in CRD. An alert will be sent to managers if any company outside the approved thematic universe is purchased.

Stock research and selection

The Portfolio Managers monitor approximately 300 companies that make up the current investment universe. These companies are put through a rigorous stock-selection process using a multi-factor model. Further ESG research on all stocks results in a final portfolio of 35-55 stocks, with ongoing monitoring and engagement with companies on ESG issues.

The Portfolio Managers and the Sustainability Team actively engage with company management on ESG issues. The team then follows up with these companies to ensure progress on related concerns.

On-going monitoring

Along with the Portfolio Managers, the risk and compliance teams provide ongoing monitoring of the portfolios to ensure that the securities held are always in line with the sustainable investing criteria defined in the prospectus.

Engagement tracking

Should the fund invest in a low rated or non-rated company, the Sustainable Investing specialists will work with the Portfolio Managers and analysts to determine the objectives of the engagement, how best to achieve them and then will ultimately discuss the results of the engagement with the investment team and any additional information relevant to our investment decision. The Portfolio Managers and the Sustainability Team monitor and measure what steps companies have put in place to achieve remedial action and assess where progress has not been made. Equity analysts publish notes systematically after engaging with a company and these notes are available on our internal research management system Insight that is visible to the investment teams globally.

Divestment

From an ESG perspective, if a company held in the portfolio is downgraded by an external provider or internal research, the Portfolio Managers will consider this in their ongoing monitoring. A downgrade will not automatically trigger a sell decision, if the Portfolio Managers believe that management has the issues under control and is credible in its commitment to ESG improvement. However, if assurances are not credible and/or engagement is not yielding progress then the fund will divest. The length of time to divest will depend on market conditions and the size of the underlying position.

Exclusion framework

The fund adheres to a principles-based exclusion framework which sets out the basis upon which certain issuers are excluded from its permissible investment universe. The framework incorporates both norms-based screening and negative screening of certain sectors, companies or practices based on specific ESG criteria to be determined by the Portfolio Managers from time to time. The norms-based screening includes issuers which fail to behave in a way which meets their fundamental responsibilities in the areas of human rights, labour, environment and anti-corruption as set out by the ten principles of the United Nations Global Compact. The negative screening includes issuers within certain single product categories or industries which are fundamentally unsustainable or are associated with significant risks or liabilities from societal, environmental or health related harm. As an illustrative example, manufacturers of controversial weapons (for example, land mines, nuclear weapons) are excluded from the investment universe of the fund under this framework. The current exclusion criteria may be updated from time to time. To apply this exclusion, the Portfolio Managers may use data provided by internal research teams as well as various external ESG data, tools and research providers.

ESG research focus

The rating focusses on material ESG issues and also incorporates a forward-looking view of the factors that are influencing a company’s ESG performance.

ESG considerations’ impact on position sizing

Final selection and position sizing is based on conviction level, liquidity, concentration risk, market timing and other supportive catalysts and events. The final portfolio is comprised of approximately 35-55 stocks, with highest conviction names making up for larger positions. As mentioned previously, ESG is integrated throughout the investment process including portfolio construction.

Minimum threshold ESG rank for a security

The minimum threshold is defined though activity alignment.

Process:

The multi-stage investment process of the fund consists of:

• Investment universe continually monitored and updated
• Themes evolution continuously monitored
• Shortlist of high-quality names we would like to own, monitored and updated
• Idea generation out of universe/ shortlist
• Stock research and validation
• Portfolio construction and risk management
• Portfolio monitoring and oversight

 Idea generation

Idea generation stems primarily from the Fidelity research platform. Fidelity has developed one of the industry’s largest research operations with 109* equity research professionals spread across various locations covering approximately 95% of the global equity universe by market cap.

Our analyst team provides both proprietary fundamental and sustainability analysis which allow us to create an investible universe for the strategy consisting of >300 companies involved in the water and waste value chains and related services or industries. The Portfolio Managers look at companies’ core business models, focusing not only on sales and profits but also on how much of their value is exposed to the global water and waste investment theme definition. The fund’s ESG focus leads to superior ESG characteristics of the overall portfolio.

Currently, the portfolio’s exposure is approximately 60% Water and 40% Waste. This is only an outcome of the stock selection process and there are no specified targets for the split. This allocation to the themes will change over time depending on the bottom-up stock selection process.

The fund’s comparative market index is the MSCI All Countries World Index (Net). The fund is not restricted to investment in market index holdings; however, it does need to adhere to the investment objective.

From the initial investment universe, the fund uses specific Environmental, Social and Governance (ESG) criteria to ensure the fund is in line with the Fidelity Sustainable Investing framework. All ESG internal and external ratings are readily available to each analyst and the Portfolio Managers to ensure complete transparency to the investment process.

The fund assesses the ESG characteristics of at least 90% of its assets. The fund’s investment universe is reduced by at least 20% due to the exclusion of issuers based on their ESG characteristics.

A minimum of 80% of assets will align to the fund’s sustainability theme and the fund may invest in securities of issuers with low but improving ESG characteristics.

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

Stock research and selection

The Portfolio Managers apply a purity factor to identify >300 companies. They look at companies’ core business models focusing not only on sales and profits but also on how much of their value is exposed to the global water and waste investment theme definition. From a purity point of view >40% purity can be expected at stock level. At the portfolio level, they target to have more than 80% of core exposure to water and waste (weighted equity value of consolidated constituents)

Using a combination of Fidelity research, third-party research including thematic research, expert calls, ESG calls and industry conferences, inputs from quantitative screens (HOLT) and company meetings, including direct engagement, the Portfolio Managers further narrow the universe.

The Portfolio Managers identify companies with structural growth drivers, operating in industries with high barriers to entry, attractive competitive dynamics, attractive returns, appropriate leverage and ability to compound. They measure best in class quality on growth, profitability, cash generation and financial strength.

Stocks which satisfy the investment philosophy and offer meaningful upside over a five-year period are considered for further analysis.

Stock research and validation will consist of detailed financial model and industry analysis, carried out in conjunction with the relevant Fidelity analyst, with a view to gain a fundamental edge in understanding the business and the industry it operates in. The Portfolio Managers undertake valuation work using a range of valuation metrics to identify mispricing, and help assess the upside potential for each stock, its relative attractiveness versus history, versus other potential investment candidates, as well as the existing portfolio holdings.

They use five-year target prices as a guideline and a trigger to re-evaluate the investment thesis. They continuously re-evaluate the investment thesis and upside potential of each holding in the portfolio. They exit stocks when the mispricing becomes appreciated by the market or when the thesis is broken. They also carry out an in-depth assessment of the potential risks associated with each stock.

Source: Fidelity International.

The fund adheres to an enhanced principle-based exclusion policy incorporating both norms-based screening and negative screening of certain sectors, companies or practices based on specific ESG criteria to be determined by the Portfolio Manager from time to time. *The fund follows the ‘Selectivity’ approach under AMF. The fund’s investment universe is reduced by at least 20% compared to a similar fund without an ESG focus.

The portfolio typically consists of 35 - 55 stocks. Position sizes are determined based on factors such as upside/ downside, growth duration, conviction, risks to fundamentals, valuation levels, intra-portfolio correlations, volatility, liquidity and risk contribution. These are managed dynamically, as remaining upside and stock volatility evolve over time.

The Portfolio Managers focus on businesses which can be broadly classified into three buckets. The common feature across the three buckets is exposure to structural growth driven by water and waste themes as well as attractive industry dynamics. In the first bucket, the focus is on companies with stable underappreciated structural growth, limited competition and low cyclicality. They tend to have underappreciated duration of growth, limited competition, long duration drivers. Examples include regulated water utilities and municipal waste collection businesses. The second bucket consists of companies with structural growth in more cyclical industries. Examples include industrials businesses providing water treatment equipment to diversified end markets. The third bucket consists of companies with underappreciated rate of growth - either because of lower, and therefore under-researched, exposure to the structural growth theme or because they are new business models, new technologies / solutions with significant headroom for growth. Examples include recycling solutions.

Typically, position sizes reflect risk characteristics of the buckets with larger sizes in the first two buckets and smaller in the third one due to the early-stage nature of these businesses. While bottom-up opportunities determine overall exposure, we expect the first two buckets to form approximately 80-90% of the portfolio and the third bucket the remaining 10-20%. The size of each bucket also depends on the point in the business cycle. The holding period of any stock is also impacted by the speed at which market consensus adjusts and the longevity of market cycles. Typically, the holding period for the first and third bucket will be 3 to 5 years and the second 1 to 3 years. Stocks are exited when the investment thesis has changed materially or proven wrong, when the company fundamentals move from reflecting structural growth to being more cyclical with the maturity of the theme, or the mispricing becomes appreciated by the market.

The Portfolio Managers continuously review the stock theses and price targets, and adherence to investment guidelines as well as the ESG characteristics of holdings within the fund. This includes actively engaging with companies, meeting with management and voting at the relevant company annual general meeting.

 Portfolio monitoring and oversight

At the stock level, the Portfolio Managers undertake a thorough analysis of the fundamental risk of the company and the investment thesis. They also monitor all ongoing developments with the help of our analysts. At the portfolio level, they assess intra-stock correlations and focus on calibrating position sizes in order to avoid unintended factor exposures or concentration risks. They also manage the portfolio’s style exposure with a view to delivering strong relative returns across a range of market environments.

The Portfolio Managers participate in a Quarterly Fund Review (QFR) chaired by the relevant Chief Investment Officer (CIO), which is also attended by a member of the Portfolio Construction and Risk Team. This review covers portfolio construction, liquidity, positions, trading activity, characteristics, style and risk in considerable detail.

Our risk oversight process includes a Quarterly Sustainability Review (QSR) for sustainable funds. This review is supported an approximately 20-page data pack covering a range of ESG datapoints, including rating profiles and disparities (Fidelity and MSCI), engagement, voting, exclusions, carbon and climate data and Principle Adverse Impacts (PAIs). The QSR discussion is currently led by the Sustainability Team, in active dialogue with our portfolio managers, our CIO, the Investment Director, and data analysts.

The QSR is designed to further strengthen the authentic integration of sustainability throughout our range of strategies, by providing a regular and structured forum for each fund to thoughtfully discuss and debate key sustainability aspects of the portfolio and its holdings, including whether the fund is meeting its sustainability objectives and how the strategy may seek to improve and monitor its outcomes.

Although not the primary point of compliance or regulatory monitoring, the QSR provides an avenue for additional checks on and discussion of these issues. The QSR works as part of our established QFR process.

The risk management processes described above are further bolstered by independent risk oversight checks and controls. These include daily monitoring of portfolio guidelines and constraints (considering regulatory requirements) by the Compliance function, and monthly Investment Risk Committees' (IRCs') evaluations of portfolio risk exposures and their alignment with expectations.

Resources, Affiliations & Corporate Strategies:

Fidelity has been committed to sustainability for over a decade. Having launched our Principles of Ownership in 2003 and as a signatory to the Principles for Responsible Investment since 2012, sustainable investing has been, and remains, a key priority. We have an extensive global research network of fundamental research analysts with broad bottom-up asset class coverage who works closely with our global sustainability team. 

As an investment manager, we have a fiduciary duty to act in the best interests of our clients. As such we have developed our approach to sustainable investing, comprising three key components (integration, stewardship, and solutions), as articulated in our Sustainable Investing Principles.  This approach aims to provide our clients with investment solutions that meet their financial and non-financial objectives, and to comply with rapidly evolving sustainability regulations for product labelling and disclosure. 

Proprietary ratings and tools sit at the heart of Fidelity’s sustainable investing approach, facilitating the integration of sustainability in our fundamental research and ensuring a consistent approach. These tools include:

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

Our ESG Ratings aim to provide a forward-looking assessment of an issuer’s sustainability characteristics, with emphasis on how it operates and the associated negative impact and risks.

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.

Note: Third party ESG ratings may apply when a Fidelity ESG rating is not available. The prioritisation between third party ESG ratings and Fidelity ESG ratings may vary across products, please refer to the prospectus for more information.

 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. We look at three key areas:

• Carbon emissions disclosure: Disclosure of Scope 1, Scope 2 and material Scope 3 emissions.
• Emissions reduction targets: Concentrates on current emissions, net zero GHG emissions ambitions, targets and carbon reduction targets.
• Climate governance: Analyses executive remuneration plans linked to climate ambitions, as well as governance responsibilities and oversight.

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

Our SDG Tool provides an insight into an issuer’s positive contribution to environmental and social outcomes. Here, we focus on products and services (what an entity does), rather than operational alignment (how an entity operates).

It is intended to complement our ESG Ratings, which assess the management of adverse impacts arising from ESG issues.

SDG Tool primary use cases:

• Issuer and entity-level assessment - analyses the percentage of revenue that contributes to each SDG. This can be used as the input to help define a thematic investment universe.
• Sustainable Finance Disclosure Regulation (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‘. 
• Reporting - 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: an internal forum to review relevant quantitative and qualitative metrics and discuss sustainability integration in specific strategies.

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 steward 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. 

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 Melbourne. 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.

The significant expansion of our team - nearly half of whom joined in 2021 or later - underscores the growing importance of sustainability within the financial services sector. This increase in team size, knowledge, and skillset has also allowed us to organise the team based on specialisation. Broadly, the team is divided into specialists focused on:

• Stewardship and research
• Strategy, product, and governance
• Client engagement

Within these broad areas, sustainable investing specialists focus on key themes such as climate, diversity, deforestation and circular economy among others.

*Source: Fidelity International, as at 31 March 2025. Excludes China AMC resources. 

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 (listed per category):

Gender Diversity:

• 30% Club Australia (2021)
• 30% Club Hong Kong (2022)
• 30% Club Japan (2019)
• 30% Club Investors Group (2019)
• 40:40 Vision (2020)
• Bright Network Women in Leadership
• Lord Mayor's Appeal - We Can Be
• Women in Finance Charter (2017)
• Women on Boards (2018)

Social Inclusion and Diversity:

• #10000 Black Interns (2020)
• BBBA Talent Accelerator (2020)
• Black North Initiative
• Black Young Professionals
• Catalyst After School Programme
• Disability:IN (2022)
• Diversity Project
• LGBT Great (2019)
• Lord Mayor's Appeal (2019)
• Minority Supplier Development UK (2020)
• OutBritain (2022)
• President’s Challenge Enabling Employment Pledge and Enabling Mark (2023)
• Race at Work Charter
• Social Enterprise UK (2021)
• Social Mobility Foundation (2021)
• Stonewall (2016)
• Trans in the City (2021)
• Valuable 500 (2019)
• Veteran Owned UK (2021)
• WeConnect International (2021)

Climate Change:

• Asia Investor Group on Climate Change (2020)
• CDP - formerly Carbon Disclosure Project (2019)
• Climate Bonds Initiative (2019)
• Climate Investment Summit (2022)
• Coalition for Climate Resilient Investment
• 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 Agenda (2021)
• Investor Group on Climate Change (2021)
• Net Zero Asset Managers Initiative (2020)
• One Planet Asset Manager Initiative (2021)
• Partnership for Carbon Accounting Financials (2022)
• Point Zero Carbon Programme (2022)
• Powering Past Coal Alliance (2021)
• Transition Pathway Initiative (2021)
• UN Climate Change Conference (2021)

Responsible Investment and Finance:

• Asia Securities Industry and Financial Markets Association (2015)
• Asia Research & Engagement (2023)
• European Sustainable Investment Forum (2017)
• European Public Real Estate Association (2023)
• Hong Kong Green Finance Association (2020)
• International Regulatory Strategy Group
• Investment Association (2010)
• Investor Forum - UK (2014)
• Principles for Responsible Investing (2012)
• The Purposeful Company Task Force
• Responsible Investment Association Australasia (2021)
• Sustainable Trading (2005)
• UK Sustainable Investment and Finance Association (2010)
• World Benchmarking Alliance (2020)

Governance and Corporate Accountability:

• Asian Corporate Governance Association (2004)
• Assogestioni (2007)
• Corporate Governance Forum (2009)
• Hong Kong Principles of Responsible Ownership (2017)
• International Corporate Governance Network (2005)
• Japanese Stewardship Code (2014)
• Taiwan Stock Exchange’s Stewardship Principles for Institutional Investors (2016)
• UK Stewardship Code (2010)

Biodiversity:

• Finance for Biodiversity (2021)
• Finance for Biodiversity Pledge (2021)
• Green Praxis Biodiversity (2022)
• Natural Capital Investment Alliance (2021)
• Taskforce on Nature-related Financial Disclosures Forum (2021)
• The Finance Sector Deforestation Action Initiative (2023)

Other Initiatives and Collaborations:

• Council for Sustainable Business
• Edinburgh Airport Sustainability Pledge
• Environment management system standard ISO 14001 (2023)
• Farm Animal Investment Risk and Return (2020)
• Inspiring More Sustainability (2019)
• Investors Against Slavery and Trafficking Asia-Pacific (2020)
• Maastricht University & GRESB (2021)
• Mental Health First Aid Training (2017)
• WEF Stakeholder Capitalism Metrics (2019)
• WorkWell Leaders (2023)

SDR Labelling:

Not eligible to use label (out of scope)