Fidelity International, an esteemed investment management firm, has revamped its approach to sustainable investing.
According to ESG Today, the company recently introduced a new sustainable investing framework, designed as a three-tiered system to categorize its funds based on the level of ESG (Environmental, Social, and Governance) integration. This strategic move is in response to an evolving landscape of ESG client demands and stringent regulatory requirements.
The development of this framework is motivated by a host of new regulatory mandates aimed at asset management firms that focus on sustainability. Notable regulations include the EU’s Sustainable Finance Disclosure Regulation (SFDR), which mandates transparency in how sustainability risks are integrated and considered.
Additionally, the European Securities and Markets Authority (ESMA) has set forth new guidelines that stipulate investment funds must ensure at least 80% of their investments adhere to sustainability criteria to use “sustainable” in fund names. Similarly, the UK Financial Conduct Authority’s (FCA) Sustainability Disclosure Requirements (SDR) aim to aid investors in evaluating the sustainability attributes of investment products and prevent greenwashing.
Fidelity International’s core business involves providing top-tier asset management services, with a strong emphasis on adapting to regulatory changes and evolving market conditions. Their revised sustainable investing framework is a testament to their commitment to regulatory compliance and innovation in investment strategies.
The new framework introduced by Fidelity International features three distinct categories of sustainable investment funds. The “ESG Unconstrained” category will include Article 6 funds, which may integrate ESG risks and opportunities per Fidelity’s firmwide exclusions, like controversial weapons.
The “ESG Tilt” consists of Article 8 funds that promote environmental and social characteristics by favoring issuers with stronger ESG performance than typical benchmarks, and include exclusions like tobacco production and thermal coal sectors. Lastly, the “ESG Target” category encompasses Article 8 and Article 9 funds focused explicitly on ESG or sustainability as a primary investment objective.
This framework is designed to meet the diverse needs of investors by aligning with regulatory expectations and enhancing the transparency and consistency of Fidelity’s sustainable investment offerings.
The updated sustainable investing framework aligns with global efforts to encourage ESG integration in investment processes. It reflects Fidelity International’s proactive stance in shaping investment strategies that not only meet client and regulatory expectations but also contribute positively to global sustainability efforts.
Fidelity International chief sustainability officer Jenn-Hui Tan said, “Regulatory change plays a vital role in shaping the sustainable investing landscape. Governments and regulators around the world are implementing various measures to encourage investors to consider ESG factors in their investment decisions, while also regulating the manner in which they market sustainable products to their clients.”
“Our revised framework aims to facilitate the creation and maintenance of a consistent, transparent, and practical range of investment capabilities that meet evolving client and regulatory needs. We believe this framework balances a robust approach to sustainability with a flexible approach that can accommodate different investment styles, asset classes and client preferences.”
Keep up with all the latest FinTech news here
Copyright © 2024 FinTech Global
