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Fidelity Investments

PRI reporting framework 2020

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You are in Direct - Fixed Income » ESG incorporation in actively managed fixed income » (C) Implementation: Integration

(C) Implementation: Integration

FI 10. Integration overview

10.1. Describe your approach to integrating ESG into traditional financial analysis.

Our portfolio managers and analysts incorporate ESG factors and research into the “mosaic” they use to evaluate investment opportunities, alongside other public filings made by subject companies.  ESG ratings from our third-party providers have been integrated within the proprietary holdings and research tools at Fidelity. Our investment professionals have the capability of seeing ESG ratings on their holdings and benchmark alongside other fundamental, quantitative, and technical ratings. The investment team has the capability to perform individual analysis of ESG risk exposures through our integration with various platforms such as Bloomberg. Fidelity is in the process of enhancing its internal real-time analytics and reporting to incorporate ESG risk exposures directly on the investment professional desktop. 

10.2. Describe how your ESG integration approach is adapted to each of the different types of fixed income you invest in.

SSA

A key concern for our sovereign credit team is the long-term sustainability of a country's economic and political situation and addressing ESG issues in their country analysis. Our fixed income team considers ESG factors when they are material to both the creditworthiness and investment performance of the country being analyzed. Our sovereign analysts also undertake a large amount of macro research, which is shared with our equity and solutions team.

Corporate (financial)

Our credit analysts are responsible for analyzing companies in order to develop a deep understanding of their business, outlook, and creditworthiness. This helps us to identify investment opportunities and avoid companies where poor fundamentals, which have not been recognized by the market, could weaken performance and potentially lead to downgrade or default. Engagement with companies is also part of our credit analysts' fundamental approach and we engage with bond issuers communicating to them any specific concerns we may have in respect of ESG issues.

Corporate (non-financial)

Our credit analysts are responsible for analyzing companies in order to develop a deep understanding of their business, outlook, and creditworthiness. This helps us to identify investment opportunities and avoid companies where poor fundamentals, which have not been recognized by the market, could weaken performance and potentially lead to downgrade or default. Engagement with companies is also part of our credit analysts' fundamental approach and we engage with bond issuers communicating to them any specific concerns we may have in respect of ESG issues.

Securitised

Our securitized analysts generally incorporate ESG factors into their fundamental credit analysis of asset-backed issuances, which serve as a vehicle to provide credit to businesses and general consumers.  Our analysts consider, among other factors, aggressive and/or predatory lending practices, regulatory standing and compliance, and underlying loan characteristics as part of the research mosaic.

10.3. Additional information [OPTIONAL]


FI 11. Integration - ESG information in investment processes

11.1. Indicate how ESG information is typically used as part of your investment process.

Select all that apply
SSA
Corporate (financial)
Corporate (non-financial)
Securitised
ESG analysis is integrated into fundamental analysis
ESG analysis is used to adjust the internal credit assessments of issuers.
ESG analysis is used to adjust forecasted financials and future cash flow estimates.
ESG analysis impacts the ranking of an issuer relative to a chosen peer group.
An issuer`s ESG bond spreads and its relative value versus its sector peers are analysed to find out if all risks are priced in.
The impact of ESG analysis on bonds of an issuer with different durations/maturities are analysed.
Sensitivity analysis and scenario analysis are applied to valuation models to compare the difference between base-case and ESG-integrated security valuation.
ESG analysis is integrated into portfolio weighting decisions.
Companies, sectors, countries and currency and monitored for changes in ESG exposure and for breaches of risk limits.
The ESG profile of portfolios is examined for securities with high ESG risks and assessed relative to the ESG profile of a benchmark.
Other, specify in Additional Information

11.2. Additional information [OPTIONAL]


FI 12. Integration - E,S and G issues reviewed

12.1. Indicate the extent to which ESG issues are reviewed in your integration process.

Environment
Social
Governance
SSA

Environmental

Social

Governance

Corporate (financial)

Environmental

Social

Governance

Corporate (non-financial)

Environmental

Social

Governance

Securitised

Environmental

Social

Governance

12.2. Please provide more detail on how you review E, S and/or G factors in your integration process.

SSA

A key concern for our sovereign credit team is the long-term sustainability of a country's economic and political situation and addressing ESG issues in their country analysis. Our fixed income team considers ESG factors and works with the centralized ESG team to determine material factors that are integral to both the creditworthiness and investment performance of the country being analyzed. Our sovereign analysts also undertake a large amount of macro research, which is shared with our equity and solutions team.

Corporate (financial)

Our credit analysts are responsible for analyzing companies in order to develop a deep understanding of their business, outlook, and creditworthiness. This helps us to identify investment opportunities and avoid companies where poor fundamentals, which have not been recognized by the market, could weaken performance and potentially lead to downgrade or default. Engagement with companies is also part of our credit analysts' fundamental approach and we engage with bond issuers communicating to them any specific concerns we may have in respect of ESG issues.

Corporate (non-financial)

Our credit analysts are responsible for analyzing companies in order to develop a deep understanding of their business, outlook, and creditworthiness. This helps us to identify investment opportunities and avoid companies where poor fundamentals, which have not been recognized by the market, could weaken performance and potentially lead to downgrade or default. Engagement with companies is also part of our credit analysts' fundamental approach and we engage with bond issuers communicating to them any specific concerns we may have in respect of ESG issues.

Securitised

Our securitized analysts generally incorporate ESG factors into their fundamental credit analysis of asset-backed issuances, which serve as a vehicle to provide credit to businesses and general consumers.  Our analysts consider, among other factors, aggressive and/or predatory lending practices, regulatory standing and compliance, and underlying loan characteristics as part of the research mosaic.

12.3. Additional information.[OPTIONAL]


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