Wade into our most recent fund addition: Fidelity Sustainable Water and Waste Fund
We welcome Fidelity with their first fund rated on The Big Exchange. Here, we give you more information on who Fidelity are, how they invest, and what you could expect to see in your fund.
Who are you investing with?
Fidelity International Limited (FIL) is the international arm of US firm Fidelity Investments. It has been independent from the US business since 1980 and is today owned mainly by management and members of the original founding family. In the UK, there is a tradition of community involvement and charitable giving.
Fidelity has a dedicated global Sustainable Investing Team based in London, Amsterdam, Singapore, Hong Kong, Shanghai, and Tokyo. This team works closely with the investment teams and is responsible for consolidating Fidelity’s approach to stewardship, engagement, ESG integration, and voting.
Fidelity’s approach to sustainable investing is built on three pillars: integrated sustainability analysis, company engagement, and collaboration. What does this mean, you ask?
1. Integrated sustainability analysis: This is how Fidelity talk about their internal approach to investigating companies. There are 4 elements to this that work together:
a. the analysts; people employed to research companies,
b. the specialist Sustainable Investing Team; experts who lead on engagement,
c. external research; research from scientists, investors etc, and,
d. our portfolio managers, people managing the money who actively consider sustainability issues in their investment decisions.
2. Company engagement: Fidelity speak directly with leadership teams at companies in which they invest, or are about to invest. Fidelity use proxy votes and shareholder resolutions to improve practices.
3. Collaboration: Their teams collaborate closely with policymakers, industry groups and non-governmental organisations to improve sustainable behaviours by businesses.
The firm has developed a proprietary ‘Fidelity Sustainability Ratings’ system, which gives their teams a comprehensive and unique store of information, from analyst insights to engagement reports from the work done with investee companies. They have a target to achieve net zero emissions across their own business by 2030 and reach net zero for holdings in their investment portfolios by 2050.
Which fund is rated on The Big Exchange?
Fidelity Sustainable Water and Waste Fund
This thematic fund aims to increase the value of your investment over 5 years or more. It will invest at least 60% of the portfolio in companies worldwide which demonstrate sustainable characteristics and are involved in the design, manufacture or sale of products and services used in water and waste management.
The managers can also invest across the water and waste supply chains, including companies developing new technologies to meet the growing demand for products and services and to help solve environmental problems created by them.
The strategy is designed to capitalise on the opportunities created by global mega-trends such as: population growth, environmental constraints, greater regulation, urbanisation rates and changes in the volume and composition of waste.
Many developed countries have an ageing water infrastructure that needs to be repaired or replaced because of climate change effects and the portfolio is well positioned to benefit from spending programmes in the US.* Meanwhile, developing countries also need to build the infrastructure required to meet growing demand.
The move towards a circular economy (which aims to reduce waste, recover resources, and channel them back into production to reduce pressure on the environment) means reducing volumes of waste as well as tackling pollution and poor disposal practices such as burning and burying. Solutions include reuse and repurposing, more efficient use of resources and less packaging, as well as developing superior materials, such as biodegradable plastic alternatives.
The managers also seek companies supporting sustainable practices; for example, recycling businesses rather than those that use landfills, or water filtration solutions over those that distribute replacement water canisters.
There is clear evidence of engagement and advocacy at Fidelity and the firm participates in a wide range of collaborate initiatives. Although there is evidence of this activity in the Sustainability Report there is limited reporting of outcomes. We would therefore like to see more tracking and progress monitoring. Consequently, the fund scores 1 out of 3 for both positive influence and transparency.
As a thematic fund, the portfolio is concentrated in certain sectors of the stock market, with 47% of the portfolio invested in industrials and 18% in utilities. However, it is diversified geographically with 46% in North America (compared with 64% for the MSCI ACWI benchmark), 18% in Europe, 12% in Japan and 10% in Emerging Markets. The fund is also well spread by market capitalisation (size) of companies.**
The fund is, unsurprisingly, most strongly aligned with SDG 6 (Clean Water and Sanitation) at 35% of the portfolio. There also close alignment with SDG 12 (Responsible Consumption & Production) at 22% and SDG 9 (Industry, Innovation & Infrastructure) at 9% of the portfolio.**
Impact stock example: Ebara Corporation
Ebara Corporation is a Japanese manufacturer of environmental and industrial machinery, including high efficiency pumps and turbines. Applications for its products include water treatment, sewage and industrial wastewater systems and solid waste processing systems.
The firm’s mission is to develop products and services that provide solutions for the environmental and energy issues facing the world today, thereby improving the lives of future generations. Its technologies and services relating to water, air, and the environment have a positive impact on the planet and society by supporting the infrastructure that is essential to everyday life.
** Fund factsheet 31/12/2021 and TBE Impact Assessment October 2021
To learn more about how to become a positive impact investor visit The Big Exchange to manage how you save, invest and spend your money, all from one place.
Please remember that when investing, making money is not guaranteed and your capital is at risk. The value of your fund can go down as well as up. Tax treatment depends on an individual’s circumstances and may be subject to change.
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