11 Best Fidelity ESG Funds to Invest in 2024

Looking for the best Fidelity ESG funds? Today, the call to be more socially and environmentally aware is too hard to ignore, even for investors. A growing number of do-gooders want their money to have a good impact on the world, and this is where ESG investing comes in.

When selecting where to invest their hard-earned cash, some of today’s investors prioritize sustainable and environmental, social, and governance (ESG) concerns.

While this is wonderful news for the planet and the communities in which we live, it also offers investors a great chance to explore new opportunities.

What are Fidelity ESG Funds?

Fidelity Investments, a Massachusetts-based global financial services firm, thinks strong sustainability policies are important to an investment’s long-term performance.

Fidelity ESG funds allow individuals to match their investments with environmental, social, and governance (ESG) goals. The firm offers several financial products, as well as instructional and planning resources, that address sustainable investing.

The investment firm has included many ESG variables in its research across all asset classes and investing disciplines and has applied ESG viewpoints directly to the sustainable products it provides.

Through Fidelity ESG funds, investors may support companies that adapt to customer expectations for sustainable practices, have inclusive and diverse workplace representation, or have strong oversight, a diverse board of directors,  and shareholder-friendly policies.

Fidelity’s SRI funds are only one of the numerous thematic investment opportunities available. Thematic investing capitalizes on emerging trends shaping the world’s future, creating long-term investment possibilities for investors.

Thematic investment may explore several megatrends, including artificial intelligence and robotics, wellness and community, sustainable living, and economic recovery.

See Related: 8 Best Socially Responsible Mutual Funds to Invest In

Sustainable Investing at Fidelity

Strong ESG standards, according to Fidelity, might be crucial to an investment’s long-term performance. As a result, the business applies an ESG viewpoint directly to the products it delivers to its clients where suitable and consistent with a fund’s investment objectives. Across all asset classes and investing disciplines, Fidelity has included ESG issues in its bottom-up fundamental analysis.

Fidelity ESG report analysis is part of Fidelity’s comprehensive investing research process, which helps it better identify risks and superior investment possibilities. Examining environmental issues, for example, might indicate whether businesses are sensitive to customer demand for environmentally friendly activities.

Focusing on social issues might identify businesses that are committed to a diverse and inclusive workplace. Furthermore, paying attention to governance may reveal whether firms are dedicated to having a diverse board of directors and adopting shareholder-friendly policies.

Fidelity analysts and portfolio managers are focused on recognizing and evaluating variables that may impact portfolio holdings, including applicable ESG risks and opportunities.

The company’s ESG team is devoted to providing education, training, tools, and insights to its investing teams to help them appraise businesses’ ESG activities.

Fidelity aims to assess a company’s present sustainability profile and uncover intangibles that might help provide a more complete picture of its future profits potential. As a result, the company’s investment universe and opportunities are set to expand.

See Related: Eli Lilly and Company ESG Profile (LLY): Is It Sustainable?

The Best Fidelity ESG Funds

Here are the best Fidelity SRI funds for sustainable investors.

1. Fidelity® Climate Action Fund (FCAEX)

Expense Ratio (Gross): 1.9%

The Fidelity Climate Action Fund, one of the top ESG funds in Fidelity, typically invests at least 80% of its assets in climate-conscious company equity securities.

According to Fidelity Management & Research Company LLC, climate-conscious companies are striving to address climate change or its effects, either indirectly through their business strategy or directly through the services, technology, or products they offer.

The following are the features of the companies the fund invests in:

(a) They have a low carbon transition score of neutral or better in the MSCI World Climate Change Index, according to MSCI.

(b) According to MSCI, they have an above-average environmental score.

(c) According to FMR, they have an above-average environmental, systemic score (FMR E Score).

When measuring a company’s environmental profile, the fund considers various factors, including water management, toxic emissions, carbon, and toxic emissions, research and investment into services, energies, and products that lower emissions and offer opportunities to achieve low-carbon transitions and vulnerability to the physical impacts of climate change. The Fidelity Climate Action Fund invests in either “value” stocks, “growth” stocks, or both.

See Related: Best Charles Schwab ESG Funds

2. Fidelity® Environmental Bond Fund (FFEBX)

Expense Ratio: 0.45% (Gross)

The Fidelity Environmental Bond Fund invests at least 80% of its assets in all forms of environmental debt securities and their corresponding repurchase agreements.

Environmental debt securities are debt securities issued by companies that produce or supply products or services that aim to provide environmental solutions and/or assist efforts to minimize their environmental impact, as well as debt securities that fund environmental initiatives.

Environmental debt securities comprise issuers who meet the following criteria, including sovereign or government-related issuers:

(a) They are included in the Bloomberg Barclays MSCI Global Green Bond USD Index and/or

(b) that have an above-average environmental Fidelity ESG score defined by MSCI or are Sustainalytics rated low risk or superior.

This Fidelity ESG fund typically invests primarily in investment-grade debt securities, with the fund managed by the Bloomberg Barclays U.S. Aggregate Bond Index’s overall interest rate risk. It also invests in both domestic and international companies.

See Related: Best Green Credit Cards to Support the Environment

3. Fidelity® Water Sustainability Fund (FLOWX)

Expense Ratio (Gross): 1.44%

The Fidelity Water Sustainability Fund intends to invest in stocks of water sustainability companies creating efficiency, extending the life cycle, and/or discovering cost-effective new technologies to supply safe, dependable, and conveniently available water.

As one of the finest Fidelity ESG funds, it invests in growth and value stocks of firms with diverse market capitalizations. It builds its portfolio using fundamental research and a bottom-up stock selection strategy. The investment aims for long-term capital growth. Normally, the fund invests at least 80% of its assets in water sustainability company stocks.

Normally, the Fidelity Water Sustainability Fund invests largely in equity securities, including:

• Water conservation services,
• water treatment,
• water resources,
• desalinization or purification facilities,
• water distribution and utilities,
• water technologies and analytics,
• environmental water services and water infrastructure (such as pumps, valves, meters, pipes),
• irrigation, and
• water supply or processing services.

See Related: Best Sustainable Robo-Advisors

4. Fidelity® Women’s Leadership Fund (FWOMX)

Expense Ratio (Gross): 1.1%

Fidelity’s Women and Investing Study found that more than half of investors are interested in a fund that invests in firms that promote women in leadership roles, with millennial women showing the most enthusiasm (around 61%).

A 21-year industry expert, Nicole Connolly oversees the Fidelity Women’s Leadership Fund. The fund’s goal is to find high-performing companies that value and promote women’s leadership and growth.

As one of the best Fidelity ESG funds, it invests at least 80% of its assets in equity securities of firms that emphasize and enhance women’s leadership and development, making it one of the top Fidelity ESG funds. Companies that meet the following criteria at the time of purchase fall into these categories:

• (a) A woman must be a member of the senior management team
• (b) A board of directors must manage the firm with at least one-third of female directors; or
• (c) The company must have implemented policies geared to recruit, retain, and develop women, in the judgment of the Adviser. The fund invests in domestic and international issuers’ securities.

According to Fidelity’s study, firms with women in senior roles and programs that promote gender diversity outperform the market over time.

See Related: Best ESG Target Date Funds

5. Fidelity® Environment & Alternative Energy Fund (FSLEX)

Expense ratio (Gross): 0.85%

Fidelity Investments released the Fidelity Select Environment and Alternative Energy Portfolio, one of the best Fidelity ESG funds, on June 29, 1989. Since its launch in May 2010, FSLEX has earned an average yearly return of 4.40 percent.

Over the last five years, it has provided an annualized total return of 5.52 percent; over the last three years, it has created an annualized return of 1.59 percent.

With the continuous debate over climate change, FSLEX is expected to increase over time. FSLEX, on the other hand, has a beta of 1.14, which makes it a lot riskier to invest in than the S&P 500 index.

Fidelity Management & Research Company LLC and other financial advisers advise the fund. FSLEX has a 0.85 percent annual net expense ratio, which is modest compared to similar funds. There is no minimum investment requirement.

FSLEX intends to invest at least 80% of its net assets in common stocks of firms engaged in business operations connected to pollution control, renewable and alternative energy, energy efficiency, recycling technology, or other environmentally friendly services.

Eaton Corp, Honeywell International Inc., 3M, Emerson Electric, Trane Technologies, Dover Corp, IDEX Corporation, TE Connectivity, Innospec Inc, and Cummins Inc were among the top ten holdings of FSLEX as of March 2020, accounting for 48.83 percent of the fund’s portfolio.

See Related: Socially Responsible Investing: How to Get Started and Best Funds to Buy

6. Fidelity® Sustainability U.S. Equity Fund (FSEBX)

Expense ratio (Gross): 1.88%

Average Life Total Returns: +2.10%

The Fidelity Sustainability U.S. Equity Fund, one of the best-performing Fidelity ESG funds, focuses its investments on equity securities. At least 80% of assets are typically allocated to equity securities of U.S. companies that the Fidelity ESG team, Fidelity Management & Research Company LLC (FMR), believes employ sustainability practices based on an assessment of each company’s individual ESG.

FMR’s proprietary ESG rating process is used to assess the condition of a company’s sustainability practices. This is measured through a data-driven framework comprising proprietary and third-party data. The process also provides a qualitative forward-looking assessment of a company’s sustainability outlook from FMR’s fundamental research analysts and ESG team.

FMR’s ESG ratings are based on various factors, including a company’s environmental profile, which may include waste management, carbon and toxic emissions, vulnerability to the physical impacts of climate change, water management, and research and investment in services, energies, and products that reduce emissions and/or provide opportunities for a low-carbon transition.

A social profile evaluation considers a company’s attitude to human capital management, product safety, data privacy, diversity and inclusion, and human rights, among other things.

See Related: Best Artificial Intelligence ETFs to Invest in Today

7. Fidelity® U.S. Sustainability Index Fund (FITLX)

Expense ratio (Gross): 0.11%

The  Fidelity U.S. Sustainability Index Fund, one of the best Fidelity ESG index funds, invests at least 80% of assets in securities that are part of the MSCI USA ESG Index, which measures the performance of large- to mid-capitalization U.S. companies with strong environmental, social, and governance (ESG) performance in comparison to their sector peers, as determined by MSCI ESG Research.

The fund uses statistical sampling approaches based on capitalization, dividend yield, industry exposures, price/book (P/B) ratio, price/earnings (P/E) ratio, and earnings growth to try to mimic the MSCI USA ESG Index’s performance with a smaller number of securities. The fund earns money by lending securities.

See Related: Ethical Dividend Stocks to Invest in Today

8. Fidelity® International Sustainability Index Fund (FNIDX)

Expense ratio (Gross): 0.11%

As one of the best Fidelity ESG funds, the Fidelity International Sustainability Index Fund typically invests at least 80% of its assets in securities that are part of the MSCI ACWI ex USA ESG Index, as well as depository receipts reflecting such securities.

The MSCI ACWI ex USA ESG Index is a capitalization-weighted index that tracks businesses that outperform their sector counterparts in terms of environmental, social, and governance (ESG) performance, as determined by MSCI ESG Research.

The MSCI ACWI ex USA ESG Index includes big and mid-cap businesses from emerging and developed economies, including those that do not include the United States.

To mimic the returns of the MSCI ACWI ex USA ESG Index, statistical sampling approaches based on capitalization, dividend yield, industry exposures, price/book (P/B) ratio, price/earnings (P/E) ratio, country weightings, earnings growth, and the effect of foreign taxes were used.

The fund earns money by lending securities.

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9. Fidelity® Sustainability Bond Index Fund (FNDSX)

Expense ratio (Gross): 0.2%

The Fidelity Sustainability Index Fund, one of the best Fidelity ESG funds, attempts to deliver investment outcomes corresponding to the interest performance and aggregate price of the debt securities in The Bloomberg Barclays MSCI U.S. Aggregate ESG Choice Bond Index.

The fund, one of Fidelity’s best ESG funds, invests at least 80% of its assets in bonds that are part of the Bloomberg Barclays MSCI U.S. Aggregate ESG Choice Bond Index.

This comprises U.S. dollar-denominated, investment-grade fixed-rate debt issues such as corporate, government, mortgage-backed, and asset-backed securities and follows the Bloomberg Barclays U.S. Aggregate Bond Index rules. For security eligibility in the Index, MSCI ESG Research uses additional sector and environmental, social, and governance (ESG) criteria.

The fund employs sampling strategies based on duration, maturity, interest rate sensitivity, security structure, and credit quality to try to mimic the performance of the Bloomberg Barclays MSCI U.S. Aggregate ESG Choice Bond Index with a smaller number of securities.

The fund also uses statistical sampling approaches based on maturity, duration, security structure, interest rate sensitivity, and credit quality to replicate the Bloomberg Barclays MSCI U.S. Aggregate ESG Choice Bond Index’s performance with fewer securities.

See Related: Micron Technology, Inc. ESG Profile (MU): Is It Sustainable?

The Best Fidelity ETFs

Fidelity offers two Active Equity ETFs that seek to combine the potential for outperformance with the trading and tax efficiency benefits of an ETF.

These ETFs aren’t the same as regular ETFs. Every day, traditional ETFs report to the public what assets they own. This ETF, on the other hand, will not. This might increase the risk of your investment. Consider the following scenario: It’s possible that trading the ETF’s shares will cost you more money.

These ETFs will provide traders with less information, and traders with less knowledge tend to charge more for transactions. The price you pay for ETF shares on an exchange may not reflect the portfolio value of the ETF. This is similar to selling shares.

The differences between these ETFs and other ETFs may have benefits. By keeping key details about the ETF under wraps, there’s a lower chance that other traders can forecast or imitate its investing approach.

This might help the ETF perform better. However, if other traders can replicate or forecast the ETF’s investing approach, the ETF’s performance may suffer.

See Related: Vista Outdoor Inc. ESG Profile (VSTO): Is It Sustainable?

1. Fidelity® Sustainability U.S. Equity ETF (FSST)

The fund aims for long-term capital growth. Investing at least 80% of assets in equity securities of U.S. firms that Fidelity Management & Research Company LLC (FMR) thinks have proven or developing sustainability policies based on an assessment of their individual environmental, social, and governance (ESG) profiles.

See Related: 3D Systems Corporation ESG Profile (DDD): Is It Sustainable?

2. Fidelity® Women’s Leadership ETF (FDWM)

The Fidelity Women’s Leadership ETF aims for long-term capital growth by normally investing at least 80% of assets in equity securities of firms that value and promote women’s leadership and growth.

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