Fidelity Sustainable Funds – The most sustainable funds and ETFs from Fidelity Investments and Fidelity International

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Fidelity brings several sustainable funds and ETFs into the market. Despite the large number of Fidelity sustainable funds and relatively recent additions, the investment strategies do not make a compelling sustainability case. Both Fidelity Investments and Fidelity International focus on an exclusionary approach, as a consequence their funds follow generic ESG indexes.

Intro to Fidelity

Fidelity Investments is one of the largest financial services companies in the world with USD 4.8 trillion assets under management. The American multinational funded in 1946 has a large family of mutual funds, mainly available for US-based investors.

For non-US investors, the alternative is Fidelity International – a former investment subsidiary of Fidelity Investments which was established in 1969 and became independent in 1980. Fidelity International invests USD 623.6 billion globally on behalf of clients in the Asia Pacific, Europe, the Middle East, and South America.

For this article we will evaluate both companies’ ESG portfolio of sustainable ETFs, targeting Fidelity Investments for US-based investors and Fidelity International for investors outside of US.

How does Fidelity Investments Approach Sustainable Investing

Fidelity Investments, sustainable funds and ETFs

When it comes to sustainable investing, Fidelity Investments takes a very simple approach following ESG factors combined with the company’s four pillars:

  • Research and integration: ESG framework addresses systemic risks that investors may not consider when evaluating quantitative earnings models
  • Product development: is committed to deep analysis and developing a wide range of sustainable products
  • Knowledge and education: uses tools like proprietary ESG data sets and bottom-up analysis to assess a company’s sustainability profile
  • Active stewardship: measures company opportunities and risks by engaging in management team meetings and proxy voting

Fidelity Investments has historically focused more on issuing mutual funds than ETFs. This is reflected in their sustainable funds as well. Out of their 16 sustainable funds, 4 are ETFs and 12 are mutual funds. Those 16 funds can also be split between Thematic Sustainable Funds, those with a specific focus on environmental, social or governance, and Broad Sustainable Funds, those with focus on all ESG themes.

NameTickerThemeAUM (mUSD)TERInceptionMSCI ESG Rating
Fidelity Climate Action FundFCAEXSustainable, mutual201.90%Jun 2021AAA
Fidelity Environmental Bond FundFFEBXSustainable, mutual fund1010.45%Jun 2021AA
Fidelity Women’s Leadership FundFWOMXSustainable, mutual fund1401.10%May 2019AAA
Fidelity Water Sustainability FundFLOWXSustainable, mutual fund1021.44%Apr 2020AAA
Fidelity Environment & Alternative EnergyFSLEXSustainable, mutual fund7560.85%Jun 1989AA
Fidelity Clean Energy ETFFRNWSustainable, ETF50.39%May 2021AA
Fidelity Women Leadership ETFFDWMSustainable, ETF30.59%Jun 2021AAA
Fidelity Sustainable International Equity FundFSYRXBroad, mutual fund21.05%Feb 2022
Fidelity Sustainable Emerging Markets Equity FundFSYJXBroad, mutual fund24.00%Feb 2022
Fidelity Sustainable Multi-Asset FundFYMRXBroad, mutual fund10.47%Feb 2022
Fidelity Sustainable U.S. Equity FundFSEBXBroad, mutual fund151.88%Jun 2021AA
Fidelity U.S. Sustainable Index FundFITLXBroad, mutual fund2,4050.11%May 2017AA
Fidelity Sustinability Bond Index FundFNDSXBroad, mutual fund2690.10%Jun 2018A
Fidelity International Sustainability IndexFNIDXBroad, mutual fund4180.20%May 2017AAA
Fidelity Sustainable High Yield ETFFSYDBroad, ETF100.55%Feb 2022
Fidelity Sustainable U.S. Equity ETFFSSTBrad, ETF60.59%Jun 2021AA

At the table above we can notice that 11 out of the 16 funds are relatively new, having been created after 2020. And 7 of the funds have very low AUM, less than USD 10 million. This indicates that Fidelity Investments has significantly boosted its offering of sustainable funds in recent years.

One outlier is Fidelity Environment & Alternative Energy (FSLEX), which was created in 1989!

How does Fidelity International Approach Sustainable Investing

Fidelity International, sustainable funds

Fidelity International has developed its proprietary framework for ESG analysis, which is integrated into the fundamental analysis. Through the sustainability rating framework, they assess the exposure of financial securities to sustainability risks and Principal Adverse Impacts, including to what extent the issuers of these securities deliver on their expectations for best practices.

The framework divides the investment universe into 99 subsectors, each with industry-specific criteria against which the issuer is assessed relative to its peers, using an A to E rating scale (A being the top rating). The sustainability ratings draw upon the assessments of more than 180 equities and fixed income analysts who take part in more than 15,000 company meetings a year. 

These are updated at least annually or on the occurrence of a significant ESG event. The ratings have been fully integrated into Fidelity’s investment process and are available to all members of the investment team on their internal research platform. They serve as an additional source of insight and as a tool to support investment decisions.

Fidelity International’s ESG analysis leverages Fidelity’s extensive research capabilities and ongoing engagement with companies, supported by the expertise of the Sustainable Investing team, to provide a forward-looking evaluation of a company’s performance and trajectory on sustainability issues. As a result, ESG integration at Fidelity is an investment analysis input and not an overlay.

The table below provides an overview of material sustainability factors and exposures observed across different sectors as assessed by Fidelity’s fundamental research team through the lens of financial materiality.

Fidelity International - sustainable criteria

As active managers, portfolio managers within Fidelity International generally have the discretion to manage the investments for their funds within a set of pre-defined investment guidelines. Portfolio managers may consider research notes, including their proprietary sustainability ratings, when making an investment decision.

In addition to implementing a proprietary ESG rating in the entire investment process, across all asset classes, Fidelity has also launched a Sustainable Family range of funds, which features two investment modes: best-in-class investment, where the managers seek to actively select companies with higher sustainability performance than their competitors, and the sustainable thematic one, which follows an approach aimed at helping to address the challenges of sustainability or create positive value for society and the environment.

These funds invest in a universe of securities – equities and bonds – characterized by high attention to ESG criteria and aim to satisfy the demand for investment solutions that aim to obtain better results concerning questions related to sustainability.

The investment approach of these funds is based on an improved sustainable investment framework, based on these main pillars:

  • ESG integration: Sustainable investment factors are integrated into the analysis, decision making and entire investment process by the fund’s managers
  • Engagement with companies: Based on a reference framework to gain a better understanding of the companies in which the ETFs invest and mitigate risks by promoting positive change, with continuous monitoring of results
  • Collaboration: Between portfolio managers, industry research analysts, ESG analysts and companies to drive improvements against agreed milestones and deadlines. They also work with industry associations and other external groups. The system allows analysts and portfolio managers to explore a proprietary sustainability database that is expected to contain information on over 3,000 issuers. The investment universe has been segmented into 99 distinct sub-sectors, each with sector-specific criteria based on which each issuer is evaluated concerning its competitors.
  • Exclusions: At the company level, producers of cluster munitions and land mines and products such as tobacco, controversial weapons, semi-automatic weapons or weapons in violation of the UN Global Compact are excluded.

Overview of Sustainable ETFs and funds from Fidelity International

Fidelity offers a large variety of sustainable ETFs that allow investors to expose themselves to both equities and fixed income. Specifically, these are “active smart beta” ETFs, instruments that arise from the combination of the active investment experience with the systematic aspects of passive investing.

“The products include both a range of sustainable ETFs, which leverage our analysts’ active fundamental insights and Fidelity’s proprietary sustainability ratings, as well as strategies that offer exposure to high-quality companies that aim to pay attractive dividends.”

Fidelity International

As of today, the total number of Fidelity’s quoted ETFs that follows ESG criteria amounts to 10, six of which are geographically distinguished equities ETFs and the remaining four are bond ETFs.

Regarding the “equity” side of Fidelity International’s offer, we find a Fidelity Sustainable Research Enhanced Equity fund that is diversified into six macro areas:

An US (FUSR), Pacific Ex-Japan (FPXR), Emerging Markets (FEMR) quoted in USD, Europe (FEUR) (quoted in EUR), Japan (FJPR) (quoted in YEN) and finally a Global (FGLR) quoted in USD. All of these ETFs follow an accumulating policy use of income.

On the fixed-income sphere instead, we have a Sustainable Global Corporate Bond Multifactor ETF (FSMF), an USD fund that invests in investment-grade corporate debt securities of issuers globally and distributes the income quarterly and a GBP twin brother (FSMP) that accumulates and automatically reinvest the dividends internally. 

Furthermore, always on the bonds side, Fidelity offers a Sustainable USD EM Bond UCITS ETF (FSEM), a portfolio primarily made up of debt securities denominated in USD, issued by governments and government agencies of emerging market countries with a quarterly distribution of proceeds and once again its GBP accumulating ETF (FEMP).

In addition to the 10 sustainable ETFs, Fidelity International also has 20 sustainable mutual funds.

Below we list more details for those sustainable ETFs and funds with AUM above GBP 100 million.

NameTickerThemeAUM (mGBP)TERInceptionMSCI ESG Rating
Fidelity Sustainable Global Corporate Bond Multifactor UCITS ETF GBP HedgedFSMPSustainable, bond ETF4390.30%Mar 2021AAA
Fidelity Sustainable Global Corporate Bond Multifactor UCITS ETF USD Inc GBPFSMGSustainable, bond ETF4490.25%Mar 2021
Fidelity Sustainable Research Enhanced Emerging Markets Equity UCITS ETF USD Acc GBPFEMSSustainable, equity ETF1300.50%Nov 2020
Fidelity Sustainable Research Enhanced Europe Equity UCITS ETF EUR Acc GBPFEURSustainable, equity ETF2410.30%May 2020AAA 
Fidelity Sustainable Research Enhanced US Equity UCITS ETF USD Acc GBPFUSSSustainable, equity ETF7330.30%May 2020AA
Fidelity Funds – Sustainable Asia Equity Fund W-Acc-GBPWSAFASustainable, equity fund2,7501.07%Mar 2014AA
Fidelity Funds – Sustainable Consumer Brands Fund W-Acc-GBPWGCIF  Sustainable, equity fund1,0401.05%Mar 2014AA
Fidelity Funds – Sustainable Water & Waste Fund W Acc. GBPWSWWGSustainable, equity fund1,7201.04%Nov 2018AAA
Fidelity Sustainable Global Equity Fund W-Acc.WGLFASustainable, equity fund5230.85%Oct 2021
Fidelity Funds – Sustainable Eurozone Equity Fund W-Acc-GBPWSEGASustainable, equity fund3461.07%Jul 2020AAA
Fidelity Funds – Sustainable Future Connectivity Fund W-ACC-GBPWGCASSustainable, equity fund2081.09%Feb 2019AAA
Fidelity Funds – Sustainable Global Equity W-Acc-GBPWSGEASustainable, equity fund3941.07%Jul 2020AAA
Fidelity Funds – Sustainable Japan Equity Fund W-Acc-GBPWSJAGSustainable, equity fund2961.09%Apr 2021AA
Fidelity Funds – Sustainable Strategic Bond Fund W-QDIST-GBP (hedged)WSSBISustainable, bond fund4930.77%Dec 2020A
Fidelity Sustainable European Equity Fund W-AccumulationWEOPASustainable, equity fund3100.85%Oct 2012AAA

In the table, we can notice that 10 out of 15 funds from Fidelity International were created after 2020. Different than Fidelity Investments, the funds from Fidelity International have a higher AUM average, with at least 5 funds with AUM above GBP 500 million. Again, we can see a trend, where Fidelity International has boosted its offering of sustainable funds in recent years.

ESG comparison of Top 3 Sustainable Funds from Fidelity Investments (US)

When ranked by AUM, the top 3 sustainable funds from Fidelity Investments are: 

Below we evaluate the ESG risk rating of the top 10 holdings of each fund:

HoldingsESG risk ratingHoldingsESG risk ratingHoldingsESG risk rating
Microsoft13.8Microsoft13.8Taiwan Semiconductor38.0
Tesla28.5Tesla28.5Tencent holdings22.9
Danaher17.7Alphabet Inc CL A24.3ASML Holding12.0
Linde9.9Alphabet Inc CL C24.3Roche Holdings (genusscheine)21.8
Nextera Energy27.2Nvidia12.8Alibaba Group Holding28.2
Prologis8.5Johnson & Johnson27.5Novo-Nordisk CL B24.1
Analog Devices23.8Home Depot11.4Astrazeneca (UK)23.2
Eaton Corp17.8Procter & Gamble27.0Sony Group13.9
Trane Technologies16.1Visa Inc CL A16.1Shopify CL A23.4
Johnson Controls International13.9Mastercard Inc CL A17.2SAP9.7

Most of the holdings of the selected funds are classified within low to medium ESG risk. Two stocks that call our attention are Tesla (medium ESG risk of 28.5) and Taiwan Semiconductors (high ESG risk of 38.0). 

We have previously made a full ESG review about Tesla, highlighting their sustainability risks. Regarding Taiwan Semiconductors, it is well known that the booming demand for silicon chips leads to a huge carbon footprint, large consumption of water and creates hazardous wasteTaiwan Semiconductors (TSMC) is responsible for more than 5% of all electricity consumption in Taiwan.

ESG comparison of Top3 Sustainable Funds from Fidelity International (non-US)

When ranked by AUM, the top 3 sustainable funds from Fidelity Investments are:

Below we evaluate the ESG risk rating of the top 10 holdings of each fund:

Sustainable Asia Sustainable Consumer Brands Sustainable Water & Waste
HoldingsESG risk ratingHoldingsESG risk ratingHoldingsESG risk rating
Taiwan Semiconductor Manufacturing Co Inc30.2Service Corp International17.0
Samsung Electronics Co Ltd19.9Nestle SA24.3Evoqua Water Technologies Corp27.6
AIA Group Ltd12.9LVMH Moet Hennessy Louis Vuitton SE12.4American Water Works Co Inc27.5
Tencent Holdings Ltd22.9Microsoft Corp13.8Fidelity ILF – USD A Acc26.3
Axis Bank Ltd28.7Alphabet Inc Class A24.3Severn Trent PLC15.1
Meituan Class B26.4L’Oreal SA17.1Advanced Drainage Systems Inc30.7 Inc Ordinary Shares – Class A27.7Apple Inc16.4Siemens AG27.7
Fidelity ILF – USD A Acc26.5Pernod Ricard SA15.3Ebara Corp26.7
HDFC Bank Ltd31.4Compagnie Financiere Richemont SANAVeolia Environnement SA21.1
United Overseas Bank Ltd19.8Essilorluxottica19.6Arcadis NV12.9

When analysing the Top 3 sustainable funds from Fidelity International, we find three companies with high ESG risk ratings: Taiwan Semiconductors (38.0 risk points), Amazon (30.2 risk points) and Advanced Drainage Systems (30.7 risk points).

We briefly discussed above the ESG issues from Taiwan Semiconductors. Amazon’s ESG issues are mainly related to Social and Governance, including problems with workers’ rights and unions, vastly covered in the media.

Advanced Drainage Systems is a provider of innovative water management solutions in the stormwater and on-site septic wastewater industries. According to Ethos ESG, the company’s main material issues are related to “Decent, safe work opportunities”, “Renewable energy growth” and “Sustainable use of natural resources”

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Are Fidelity Sustainable Funds a good investment?

Both Fidelity Investments and Fidelity International bring several options of mutual funds and ETFs for investors looking for sustainable options. While Fidelity International has a clearer approach to ESG investing, applying its framework for sustainable funds, Fidelity Investments takes a more generic approach when issuing sustainable funds. 

For example, Fidelity U.S. Sustainable Index Fund (FITLX), is the most popular fund from Fidelity Investments and has a very attractive TER of 0.11%. However, since it follows the MSCI USA ESG Index, it ends up being a very generic ESG fund, with a composition not too far from the S&P 500 index.

When selecting a sustainable fund from Fidelity, be sure to verify the underlying index and the ESG performance of the top holdings. Fidelity offers too many sustainable fund options and most of them overlap each other. Despite focusing on actively managed funds, Fidelity does not have strong ESG criteria.

Not investment advice: The information provided on this website is intended for general information purposes only and does not constitute investment advice, financial advice, trading advice, or any other sort of advice. You should conduct your due diligence and, if necessary, consult a qualified independent financial advisor before making any investment decision.

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Categories: ESG


Fernando created Your Green Wealth to help investors find sustainable investing options. When not writing for Your Green Wealth, he is a business developer for renewable energy projects.


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