ESG Investing

Align your values with your investments

ESG Investing (environmental, social, and corporate governance) used to carry the stigma that investors needed to make certain concessions in order to participate. But research shows you don't necessarily have to sacrifice performance or price when choosing investments that make a positive impact.

A Closer Look at ESG Investing

Impact, Thematic, Socially Responsible, Sustainable: While these terms are often used interchangeably and are all forms of investing intended to make a societal impact, they actually evaluate investments differently.

Making a positive impact for amore sustainable futureFostering the well-being ofemployees and local communitiesConducting business in aresponsible mannerEnvironmental factors considerhow a company performs as asteward of the naturalenvironment.Social factors consider how acompany manages relationshipswith its employees, suppliers,customers, and the communitiesin which it operates.Governance factors consider thequality and reasonableness of acompany’s leadership, executivepay, audits and internal controls,and shareholder rights.TYPES OF IMPACT INVESTINGSocially ResponsibleInvesting (SRI)Excludesspecific industries.ThematicInvestingFocuses on a specificissue or theme.ImpactFirstPrioritizes socialgood over returns.EnvironmentalSocialGovernanceSustainableInvesting (ESG)Sustainable or ESG Investing looks at a company’s own environmental, social, and corporategovernance practices, as well as its overall investment decision-making process.1This lens intoday-to-day business practices gives investors a larger view of the company’s sustainability efforts,so they can more accurately assess the investment’s risk and potential return.

Who's Using ESG?

Interest in ESG spans investor profiles, from millennials to high-net-worth investors.

Interested in addingCurrently own2018201620182016201620182016201820162018MenMillennialsGen-Xers$10M+ in assetsWomen19%26%38%40%57%31%31%39%31%30%9%10%15%37%28%15%24%20%27%19%

Source: U.S. Trust Wealth Survey (2018).

The Case for ESG Investing

Research shows you don’t have to give up performance and price when looking to align your values with investments.

Percentage of Sustainable Funds by Performance Quartile2
2017 2016 2015
Top quartile 24% 28% 28%
2nd quartile 30% 27% 29%
3rd quartile 26% 30% 24%
Bottom quartile 20% 15% 19%
On Par Expenses
Number ofshare classesFee levelHigh88112Above averageAverage117Below average97Low102Of the 516 ESG share classes,the majority of fees are at orbelow average.61%3

Fidelity’s ESG Lineup

Only Fidelity offers ESG Index Investing in every major asset class
Name Symbol Exp. Ratio
Fidelity U.S. Sustainability Index Fund FNIDX 0.11%
Fidelity International Sustainability Index Fund FITLX 0.20%
Fidelity Sustainability Bond Index Fund FNDSX 0.10%
An actively managed thematic fund
Name Symbol Exp. Ratio
Fidelity Select Environmental & Alternative Energy Portfolio FSLEX 0.87%
  • 1. Fidelity ESG Office, 2018.
  • 2. For this review, we have defined the U.S. sustainable funds universe as those open-end funds and exchange traded portfolios that, by prospectus, state that they incorporate ESG criteria into their investment processes, or indicate that they pursue a sustainability related theme, or seek measurable sustainable impact alongside financial return. This definition excludes funds that only use values-based exclusionary screening that is not related to sustainability issues. This results in a narrower cut of funds than would be created using the Morningstar socially conscious fund screen, but one that better reflects the concept of sustainable investing and distinguishes between sustainability and other types of values-based investing.
  • 3. Expense ratios were analyzed using the Morningstar Fee Level, which compares the expense ratios of a fund's share classes relative to a peer group based on both the fund's style (such as U.S. large cap or world stock) and type of share class (such as no-load, frontload, institutional, or retirement). The result is a percentile ranking from 1 (least expensive) to 100 (most expensive). Each share class is assigned a fee level based on the percentile ranking, ranging from Low (the cheapest quintile) to High (the most expensive quintile). 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.
  • The performance of the fund and its index may vary somewhat due to factors such as fees and expenses of the fund, transaction costs, sample selection, regulatory restrictions, and timing differences associated with additions to and deletions from its index. 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, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible.
  • The information provided is general and educational in nature. It is not intended to be, and should not be considered, legal advice or legal opinion.
 
 

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