We are seeing more interest in Impact investing of late, or in other words, the desire to generate a measurable, beneficial social or environmental impact alongside a financial return. Below is a brief overview of Impact investing (also commonly referred to as "Socially Responsible Investing" or "ESG" investing which stands for Environmental, Social and Corporate Governance) and some low cost options available on our investment platform.
Socially Responsible and Sustainable/ESG Investing
Socially responsible investing and sustainable/ESG (Environment, Social, and Corporate Governance) investing are terms that are often used interchangeably. While they are both forms of investing that evaluates investments based on their societal impact, their approaches are somewhat different. Socially responsible investing focuses on the exclusion of specific industries, while sustainable investing takes into account factors considered important to the overall sustainability of a business:
Environmental Issues – Climate change, carbon emissions, air/water pollution, energy efficiency
Social Issues – Labor standards, supply chain management, health and safety, gender diversity
Governance Issues – Board and executive compensation, lobbying, business ethics, political contributions
Benefits of ESG Investments
Meaningful Approach – ESG funds allow you to invest in the stocks or bonds of companies whose values are aligned with what's important to you.
Comparable Performance – Sustainable investing is on par with the performance of comparable traditional investments.
Competitively-priced – Expense ratios for ESG funds are similar to those of traditional mutual funds, there are hundreds of mutual funds and exchange traded funds available industry-wide.
Please see below several sustainability-focused investment options available through the Fidelity platform.
Fidelity® U.S. Sustainability Index Fund (FITLX)
Asset Class: | Domestic (US) Large and Mid-Cap Equities |
Objective: | Seeks to provide investment results that correspond to the total return of the MSCI USA ESG Index |
Strategy: | Normally investing at least 80% of assets in securities included in the MSCI USA ESG Index, which represents the performance of stocks of large- to mid-capitalization U.S. companies with high environmental, social, and governance (ESG) performance relative to their sector peers, as rated by MSCI ESG Research. Using statistical sampling techniques based on such factors as capitalization, industry exposures, dividend yield, price/earnings (P/E) ratio, price/book (P/B) ratio, and earnings growth to attempt to replicate the returns of the MSCI USA ESG Index using a smaller number of securities. Lending securities to earn income for the fund. |
Key Risks: | The securities of medium sized, less well-known companies can be more volatile than those of larger companies. |
Fidelity® Select Environment and Alternative Energy Portfolio (FSLEX)
Asset Class: | Domestic (US) Large-Cap Equities |
Objective: | Seeks capital appreciation. |
Strategy: | Investing primarily in companies engaged in business activities related to alternative and renewable energy, energy efficiency, pollution control, water infrastructure, waste and recycling technologies, or other environmental support services. Normally investing at least 80% of assets in securities of companies principally engaged in these activities. Normally investing primarily in common stocks. Investing in domestic and foreign issuers. |
Key Risks: | The environment and alternative energy industries can be significantly affected by government regulations and subsidies, changing supply and demand for traditional energy sources, and availability of funding for remedial cleanup efforts or development of new technologies, and can be subject to risks associated with hazardous materials. |
Fidelity® International Sustainability Index Fund (FNIDX)
Asset Class: | Foreign/International Large and Mid-Cap Equities |
Objective: | Seeks to provide investment results that correspond to the total return of the MSCI ACWI (All Country World Index) ex USA ESG Index. |
Strategy: | Normally investing at least 80% of assets in securities included in the MSCI ACWI ex USA ESG Index and in depository receipts representing securities included in the index. The MSCI ACWI ex USA ESG Index is a capitalization-weighted index that provides exposure to companies with high environmental, social, and governance (ESG) performance relative to their sector peers, as rated by MSCI ESG Research. The MSCI ACWI ex USA ESG Index consists of large- and mid-cap companies across developed and emerging markets, excluding the United States. Using statistical sampling techniques based on such factors as capitalization, industry exposures, dividend yield, price/earnings (P/E) ratio, price/book (P/B) ratio, earnings growth, country weightings, and the effect of foreign taxes to attempt to replicate the returns of the MSCI ACWI ex USA ESG Index. Lending securities to earn income for the fund. |
Key Risks: | Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. |
Fidelity® Sustainability Bond Index Fund (FNDSX)
Asset Class: | Domestic (US) Intermediate-Term Bonds |
Objective: | Seeks to provide investment results that correspond to the aggregate price and interest performance of the debt securities in the Bloomberg Barclays MSCI U.S. Aggregate ESG Choice Bond Index. |
Strategy: | Normally investing at least 80% of the fund's assets in bonds included in the Bloomberg Barclays MSCI U.S. Aggregate ESG Choice Bond Index (the Index), which is composed of U.S. dollar denominated, investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities, and follows the rules of the Bloomberg Barclays U.S. Aggregate Bond Index. MSCI ESG Research applies additional sector and environmental, social, and governance (ESG) criteria for security eligibility in the Index. Using statistical sampling techniques based on duration, maturity, interest rate sensitivity, security structure, and credit quality to attempt to replicate the returns of the Bloomberg Barclays MSCI U.S. Aggregate ESG Choice Bond Index using a smaller number of securities. Using statistical sampling techniques based on duration, maturity, interest rate sensitivity, security structure, and credit quality to attempt to replicate the returns of the Bloomberg Barclays MSCI U.S. Aggregate ESG Choice Bond Index using a smaller number of securities. |
Key Risks: | In general, the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible. Leverage can increase market exposure and magnify investment risk. |