Fidelity's proprietary sustainability ratings
Fidelity continues to refine how we integrate ESG considerations through our investment process, our program for corporate and regulatory engagement and collaboration. In 2019 we introduced our own proprietary sustainability ratings which means we assess not just what the company is today, but what we think the company will be in the future.
It is important to understand why we believed we needed to create our own sustainability ratings system. Until two years ago, we were using a ‘quantamental’ type of rating to assess companies on ESG, which had its limitations. We used inputs from third party providers, their ratings, their data, and created our own materiality mapping on what we deemed important, and using this data we determined an ESG score. While useful, this model had its limitations. It sat outside our global research platform and relied heavily on external data - which is essentially a view on a company’s point in time ESG rating.
To truly embed ESG into our investment process we decided to introduce an ESG ratings system - use our own analyst research and create a ratings system which is robust and forward looking. This means our sustainable ratings don’t rely solely on public information, and essentially becomes part of our DNA - our deep fundamental research and analysis on every company that we own.
Analysts rate companies on ESG factors relevant to their industry and for companies that have securities both in equities and fixed income, our analysts will work together in order to come up with a joint view - designed to be forward looking. In other words, they are an assessment of not just what the company is today, but what we think the company will be in the future.
This is driven by our belief that a lot of the alpha signal in ESG investing is from the improvement that companies make in their sustainability practises. It isn't just about investing in the good companies. It's about also investing in companies that are going to be good tomorrow. We aim to promote change through our engagement programme and enjoy the financial returns as a result that will accrue to those companies as a result of that.
In summary, Fidelity’s approach to sustainable investing focuses on three main pillars:
- Integration of ESG considerations through our investment process. Increasingly, we believe successful investing is going to be about choosing the companies that have the superior sustainability characteristics because these are the companies that are going to be the winners of the future, and our investment process needs to evolve to be able to identify those companies.
- Corporate and regulatory engagement. We work with the companies that we're invested with; we try to promote the kinds of standards that we think are necessary in order for these companies to succeed both from a societal perspective and also from a shareholder perspective.
- Collaboration. We want to be part of the right platforms and we want to do this in partnership with our peers and with our clients in the industry, where we feel that we can leverage our effort for the maximum impact.
This video is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.
Prior to making an investment decision, retail investors should seek advice from their financial adviser. This video is intended as general information only.
Please remember past performance is not a reliable indicator of future performance. This video has been prepared without taking into account your objectives, financial situation or needs. You should consider such matters before acting on the information contained in this video. Investors should also obtain and consider the Product Disclosure Statements ("PDS") for any Australia Fidelity products before making any decision about whether to acquire the products. The PDS is available on www.fidelity.com.au or can be obtained by contacting Fidelity Australia on 1800 119 270. The relevant Target Market Determination (TMD) is available via www.fidelity.com.au. This video may include general commentary on market activity, industry or sector trends or other broad-based economic or political conditions which should not be construed as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be construed as a recommendation to buy, sell or hold these securities. While the information contained in this video has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. Investments in overseas markets can be affected by currency exchange and this may affect the value of your investment. Investments in small and emerging markets can be more volatile than investments in developed markets. This video may contain statements that are "forward-looking statements", which are based on certain assumptions of future events. Actual events may differ from those assumed. There can be no assurance that forward-looking statements, including any projected returns, will materialise or that actual market conditions and/or performance results will not be materially different or worse than those presented. This video may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity's funds is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Details of Fidelity Australia’s provision of financial services to retail clients are set out in our Financial Services Guide, a copy of which can be downloaded from our website.
© 2022 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.
Want to learn more about sustainable investing at Fidelity?Learn more