Fidelity International Real Estate is an experienced, active and engaged real estate investor. We seek to deliver strong long-term returns for our investors in a sustainable way. Sustainability encompasses a broad range of issues that may of themselves, or in combination, have a material impact on the risk/return characteristics of our investments. Our goal is to adopt a policy aimed at embedding a culture of sustainability in our entire investment process, accompanied by hard data, regular monitoring and ambitious targets. Under the ‘umbrella’ term of sustainability, Environmental, Social and Governance (ESG) considerations encapsulate many of the day-to-day practicalities in managing a property portfolio. By framing our overarching policy in terms of ‘sustainability’ rather than simply ‘ESG’ we aim to capture our ethos around all of our investment activities and demonstrate what we aspire to as stewards of our clients’ capital. Our core rationale for adopting a policy of active management of ESG factors in our property portfolios is that it promotes a positive impact on the environment, for both our occupiers and the local communities around our buildings, and therefore leads to superior financial returns.
Delivering attractive risk-adjusted returns for our investors is the primary focus of our activities, but it is also entirely consistent with prioritising sustainability. Investors and tenants alike make long term commitments to buildings and so it is essential we research, analyse and integrate sustainability considerations through the entire life-cycle of ownership, from purchase, ongoing management, refurbishment, development and ultimately sale. We believe this approach reduces project risks, builds social support, improves asset liquidity and generates value. The long-term value of a property investment is strengthened by increasing climate change resilience, limiting the risk of regulatory non-compliance or and improving its competitive position in the market. Our aim is to incorporate the management of ESG risks and opportunities into our day-to-day business operations, whether we are looking to acquire, develop or hold the asset
We apply the following four principles:
1. Deliver risk-adjusted investment performance by integrating ESG considerations into our investment processes - and document this at each stage of the investment process.
2. Implement sustainable practices through innovation and the sharing of best practices across our portfolios.
3. Act responsibly as a steward for the natural environment by addressing environmental impacts whilst also enhancing operational efficiency and values.
4. Recognise social impact and have consideration for the local communities in which our assets reside.
Our Multi Asset team seeks to deliver specific outcomes that meet client needs, combining asset classes including equities, fixed income, real estate, commodities and alternatives.
Our outcome-focused portfolios are designed to deliver specific investment objectives, including income, specific risk profiles, absolute and total return. We see growing demand for these types of strategies among investors, who look for consistent outcomes as well as a focus on risk across market cycles.
As such, we consider the sustainability of our investments extremely important. When looking to hold underlying strategies for the long term, we aim to understand all elements of risk, including non-financial factors such as ESG. We actively engage with third-party providers in order to understand their process for assessing the ESG policies of companies and issuers. When assessing the broad universe of managers, we recognise that there is no single ‘correct’ approach from an ESG perspective. It goes beyond a straightforward negative screening process or having an awareness of potential risks - and our analysts look for clear evidence that underlying managers or providers are considering sustainability in their approach.
Fidelity’s Sustainable Investment team are an important resource for our multi asset analysts and managers in assessing the ESG risk processes adopted by counterparties. So too is Fidelity Multi Asset’s dedicated Operational Due Diligence (ODD) team, which carries out an assessment of policies and processes to ensure we are partnering only with reliable counterparties who meet the highest standards of corporate governance. This team reports directly into the Multi Asset Chief Operating Officer, which ensures independence from the research analysts’ own due diligence of the investment proposition.
The operational due diligence process questions the ESG considerations throughout the firm’s investment process, as well as governance and control oversight, and transparency and investor education. This includes gaining an understanding of the underlying
managers’ own active ownership approach, the development of their ESG capabilities and the resources they have dedicated to principles of sustainability.
Part of this assessment by the ODD team includes reviewing accounting and audit quality, board structure and composition of the underlying manager, remuneration of managers and shareholder rights. Disclosures from external managers and the results of this review go on to form part of the final investment recommendation presented to portfolio managers.
Our team believes this level of due diligence and evaluation can help to ascertain the sustainability of an underlying manager’s performance and also their competitive advantage. Considerations of sustainability are weighed up by the investment team at Fidelity Multi Asset, alongside Fidelity’s fundamental analysis.
This commitment to applying ESG principles to our multi asset offering is drawn from the depth of our corporate access and coverage – aiming to identify those providers who have the tools, expertise and commitment to manage their strategies sustainably. In this context, ESG considerations are not only an additional source of insight for our multi asset portfolio managers, but also a necessary one.