An article from 
Dive Brief
Fidelity’s international arm said its revised framework aims to “ensure ongoing alignment with transparency and disclosure requirements.”
Published July 2, 2024
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Dive Brief:
- Fidelity International — which provides investment management services to Fidelity’s clients in Europe, Canada and Asia — unveiled an updated sustainable investing framework last week in response to an “evolution” of climate disclosure requirements.
- The global firm said it was phasing out its Fidelity Sustainable Fund Family and introducing a revised framework to boost alignment with disclosure and transparency requirements under recent climate regulations. The update would also cater to new naming conventions for sustainable or ESG funds, according to the firm.
- Fidelity International said its updated framework would categorize funds into three categories — ESG Unconstrained, ESG Tilt and ESG Target — which will be aligned to the European Union’s Sustainable Finance Disclosure Regulation.
Dive Insight:
The SFDR aims to increase transparency on sustainable investments and has set standards on how financial market participants, including asset managers, investment advisors and even funds should disclose sustainability information, according to the European Commission. The regulation is also structured in a way that allows investors to ascertain how sustainability risks are incorporated into the investment decision-making process, per the EU.
Fidelity International funds that fall under the “ESG Unconstrained” category will align with Article 6 of the SFDR, which lays out how funds that don’t prioritize ESG or sustainability in their investment decisions — such as tobacco or thermal coal producers — need to disclose.
The “ESG Tilt” category will align with Article 8 of the SFDR, which refers to investments or projects that promote environmental or social objectives, also known as “light green funds.” Fidelity said this classification will require funds to have a “better than benchmark” rating or undergo an “investment universe” test to show they have “superior ESG tilts” compared to benchmarks. The classification will also include funds that were not a part of its previous Sustainable Fund Family.
Funds under the “ESG Target” category will align to both SFDR’s Article 8 and Article 9 — which outlines disclosure requirements for funds that have declared “sustainable investment as [their] objective” and whose portfolio primarily comprises ESG-focused investments. Fidelity said this classification would include funds that were part of its now-phased out Sustainable Fund Family.
Fidelity International, originally established as a subsidiary of Fidelity Investments before being spun out as a separate company, launched its revised framework against a flurry of recent climate disclosure regulations. These include the Securities and Exchange Commission’s now-stayed climate disclosure rule, California’s two climate bills and the EU’s Corporate Sustainability Reporting Directive. The firm said its revised framework will also “broadly align” with the European Securities and Markets Authority’s rule requiring funds with an objective in their name to invest 80% of its assets in that objective.
Filed Under: Sustainability, Corporate Governance, Finance
