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 put sustainable and environmental, social, and governance (ESG) concerns at the forefront of their decision-making. 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.
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What are Fidelity ESG Funds?
Fidelity Investments, a Massachusetts-based global financial services firm, thinks that 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 has a number of 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 they provide.
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 the emerging trends that will shape the world’s future, creating long-term investment possibilities for investors.
Several megatrends, including artificial intelligence and robotics, wellness and community, sustainable living, and economic recovery, maybe explored through thematic investment.
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 into 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.
Businesses that exhibit a commitment to a diverse and inclusive workplace might be identified by focusing on social issues. Furthermore, paying attention to governance may reveal whether firms are dedicated to having a diverse board of directors and adopting shareholder-friendly policies.
Analysts and portfolio managers at Fidelity are focused on recognizing and evaluating variables that may have an impact on 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 in their appraisal of businesses’ ESG activities.
Fidelity aims to assess a company’s present sustainability profile as well as uncover intangibles that might help to provide a more full picture of its future profits potential. As a result, the company’s investment universe and opportunity set expand.
The best Fidelity ESG Funds
Here are the best fidelity SRI funds for sustainable investors. Do note that the expense ratios and total returns indicated are as of 2021.
1. Fidelity® Climate Action Fund (FCAEX)
Expense Ratio (Gross): 1.9%
Average Lifetime Total Return: 2.50%
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’s equity securities. Companies that are climate conscious, according to Fidelity Management & Research Company LLC, are striving to address climate change or its effects, either indirectly via 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 a variety of 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.
2. Fidelity® Environmental Bond Fund (FFEBX)
Expense Ratio: 0.45% (Gross)
Average Life Total Returns: 0.22%
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 own 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 as 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 in accordance with the Bloomberg Barclays U.S. Aggregate Bond Index’s overall interest rate risk. It also invests in both domestic and international companies.
See Related: 8 Best Green Credit Cards to Support the Environment
3. Fidelity® Water Sustainability Fund (FLOWX)
Expense Ratio (Gross): 1.44%
Average 1-Year Return: 33.90%
The Fidelity Water Sustainability Fund intends to invest in stocks of water sustainability companies that are 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 the growth and value stocks of firms with a diverse market capitalization. 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. 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 are examples of such businesses.
4. Fidelity® Women’s Leadership Fund (FWOMX)
Expense Ratio (Gross): 1.1%
Average 1-Year Return: 30.35%
In Fidelity’s Women and Investing Study, they 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%).
Nicole Connolly, a 21-year industry expert, oversees the Fidelity Women’s Leadership Fund. The goal of the fund 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) The firm must be managed by a board of directors with at least one-third 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.
5. Fidelity® Environment & Alternative Energy Fund (FSLEX)
Expense ratio (Gross): 0.85%
10-Year Average Return: +13.90%
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, and 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 when compared to similar funds. There is no requirement for a minimum investment.
FSLEX intends to invest at least 80% of its total 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 in equity securities, with at least 80% of assets 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 ratings process is used to assess the condition of a company’s sustainability practices. This is measured through a data-driven framework that consists of both 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 a variety of 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.
7. Fidelity® U.S. Sustainability Index Fund (FITLX)
Expense ratio (Gross): 0.11%
3-Year Average Return: 17.41%
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.
Using 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.
8. Fidelity® International Sustainability Index Fund (FNIDX)
Expense ratio (Gross): 0.11%
3-Year Average Return: 17.41%
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 both emerging and developed economies 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.
9. Fidelity® Sustainability Bond Index Fund (FNDSX)
Expense ratio (Gross): 0.2%
3-Year Average Return: +9.02%
The Fidelity Sustainability Index Fund, one of the best Fidelity ESG funds, attempts to deliver investment outcomes that correspond 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, which is one of the best ESG funds from Fidelity, 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 is made up of 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.
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 employs sampling strategies based on duration, maturity, interest rate sensitivity, security structure, and credit quality. The fund also uses statistical sampling approaches based on maturity, duration, security structure, interest rate sensitivity, and credit quality to try to replicate the Bloomberg Barclays MSCI U.S. Aggregate ESG Choice Bond Index’s performance with a lower number of securities.
See Related: 7 Best Environmental Stocks to Invest in Today
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 who have 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.
There may be benefits to the differences between these ETFs and other ETFs. By keeping key details about the ETF under wraps, there’s a lower chance that other traders will be able to forecast or imitate its investing approach. This might help the ETF perform better. However, if other traders are able to replicate or forecast the ETF’s investing approach, the ETF’s performance may suffer.
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.
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.
