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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 » Implementation processes

Implementation processes

FI 01. Incorporation strategies applied

Indicate (1) Which ESG incorporation strategy and/or combination of strategies you apply to your actively managed fixed income investments; and (2) The proportion (+/- 5%) of your total actively managed fixed income investments each strategy applies to.
SSA
0 Screening alone
0 Thematic alone
99 Integration alone
1 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (financial)
0 Screening alone
0 Thematic alone
99 Integration alone
1 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Corporate (non-financial)
0 Screening alone
0 Thematic alone
99 Integration alone
1 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%
Securitised
0 Screening alone
0 Thematic alone
100 Integration alone
0 Screening + integration strategies
0 Thematic + integration strategies
0 Screening + thematic strategies
0 All three strategies combined
0 No incorporation strategies applied
100%

01.2. Describe your reasons for choosing a particular ESG incorporation strategy and how combinations of strategies are used.

ESG factors are linked to the creditworthiness of issuers. Companies who follow ESG best practices often tend to be more insulated from exogenous shock. Moreover, management teams who have a broader focus on all stakeholders often take debtholders more into consideration than do companies seeking purely to maximize profit. Understanding these drivers as part of our broader fundamental research background allows us to better understand the true risk profile of issuers and therefore make more accurate assumptions of fair value. Considering that fixed income returns are structurally more limited than equity, we are even more interested in the long-term overall risk profile of companies. Our ESG integration allows us to comprehensively assess the risk profile of issuers and help us more accurately price debt securities.
In the past, we've been asked to manage custom portfolios that incorporate ESG criteria for clients. We can accommodate these restrictions in a separate account structure. Typically, these custom portfolios will include restrictions or exclusions for specific companies or market sectors as requested by our client.

01.3. Additional information [Optional].

While we do not screen out companies from our investment universe, except for specific custom portfolios we manage for institutional investors, we adopt a positive engagement approach and discuss ESG issues with the management of the companies in which we invest or consider investing on behalf of our clients. We use the information gathered during these meetings both to inform our investment decisions and to encourage company management to improve procedures and policies. Fidelity believes that strong management creates long-term shareholder value and we generally support management of companies in which we have invested fund and account assets. We also recognize, however, that the company's shareholders, the owners of the company, have a responsibility to evaluate how management and directors are performing, and how shareholders' rights and ownership interests are handled. As shareholders, we may form our own views on the strategy and governance of a particular business, and our views may inform our interactions with companies and our proxy voting practices. We also engage with companies' management and directors, through visits and meetings, to confer on topics, such as ESG issues, that we believe could affect long-term performance. Fidelity believes that high standards of corporate responsibility generally make good business sense and have the potential to protect and enhance investment returns.

Generally, ESG matters serve as a factor in security valuation and investment management and have for a long time. One key to analyzing any security is to develop an understanding of the material factors that contribute to the value of that security. These factors are most often understood to be financial factors, yet other factors that may be construed as non-financial could be viewed as material to the value of a security. Our investment staff includes all material factors into their security analysis process as they assess the valuation and outlook of a security.


FI 02. ESG issues and issuer research (Private)


FI 03. Processes to ensure analysis is robust

03.1. Indicate how you ensure that your ESG research process is robust:

specify description

          ESG specialists are responsible for periodically reviewing quality of ESG research providers and making changes if necessary, to ensure our continued receipt of quality research.
        

03.2. Describe how your ESG information or analysis is shared among your investment team.

03.3. Additional information. [Optional]

Our fixed income analysts may include in their research notes, assessments of material ESG factors pertaining to a portfolio company being evaluated. Some ESG issues are industry-wide or global, while others are specific to the individual company. Research notes posted to our global research database are generally available to all Fidelity investment professionals, subject to internal policies and procedures.


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