Sustainable, Responsible &/or ESG Policy:

At Fidelity, we believe that sustainable investment makes good business sense and helps to protect and enhance investment returns. Consequently, our investment process takes ESG factors into account as these can have a material impact on investment performance. Our ESG integration occurs across all sectors and markets in which we invest.

The fund seeks to integrate ESG issues in its investment and risk monitoring process to help achieve an overall sustainable investment approach. Ultimately, Fidelity believes that by investing in sustainable companies the fund can generate a positive impact for its investors, but also the wider global economy.

From an ESG perspective, the fund follows a three-part implementation framework:

• Best in class: Invests in best in class issuers as rated by MSCI or by Fidelity proprietary ESG ratings.
• Positive sustainability trajectory: Lower rated issuers must have improving ESG characteristics primarily measured by the Fidelity trajectory indicator.
• Sector based exclusions: As well as Fidelity-wide exclusions, additional exclusions include controversial weapons, semi-automatic weapons, military weapons, thermal coal, tobacco and United Nations Global Compact violations (exclusions for military and semi-automatic weapons, tobacco and thermal coal are based on a 5% revenue threshold and are applied at issuer level).

The fund seeks to achieve its investment objectives while promoting, among other characteristics, environmental or social characteristics, and does so by committing to maintain a minimum of 70% in securities that maintain favourable ESG characteristics*.

*Favourable ESG characteristics are defined by reference to a combination of different measurements such as ESG ratings provided by external agencies or Fidelity ESG Ratings. Further details on the methodology applied are set out at https://fidelityinternational.com/sustainable-investing-framework/ and may be updated from time to time. The Portfolio Managers may use data provided by internal research teams and complemented by external ESG score providers to form an assessment of the favourable ESG characteristics. A maximum of 30% of this fund’s net assets are allowed in issuers that are not deemed to maintain favourable ESG characteristics in accordance with the criteria above, but which demonstrate improving sustainable indicators. Improving sustainable indicators are issuers classified as such through the trajectory outlook of Fidelity ESG Ratings or issuers which in the view of the Portfolio Managers demonstrate the potential for improvement through the implementation and execution of a formal engagement plan. The criteria used to determine this reference rating may change over time and will be updated at https://fidelityinternational.com/sustainable-investing-framework/ accordingly.

Process:

Our investment process draws on our long-standing experience managing fixed income portfolios combined with a proactive integration of best-in-class Environmental, Social, and Governance (ESG) investing. The investment process at Fidelity International (Fidelity) is designed to ensure that the best investment ideas are identified and incorporated efficiently within client portfolios. In order to successfully deliver performance, Fidelity adopts a team-based approach which combines the strengths and skills of four separate disciplines - portfolio management, credit research, quantitative research, and trading. The Fixed Income Team also draws upon the research of our equity and markets research team as well as our ESG Team. These professionals offer unique insight into companies, the economy and markets.

One key aspect of our process is to continuously engage with the companies we invest in. Our equity and credit research analysts are the starting point of ESG engagement with the issuers, and they will flag if there is an area of required engagement. In addition, the ESG Team at Fidelity will also have separate engagement calls and meetings, focusing on our current engagement themes (such as the transition to a low carbon economy, waste and the circular economy, human rights in supply chains, gender diversity on corporate board, data privacy and security, and remuneration). If a company we have selected on the basis of having a credible ESG trajectory fails to meet its objectives, it will become a candidate for exclusion. This is an important element as we believe it is important to maintain high standards relating to all of our selected issuers.

The broader investment process can be broken down into five stages: market assessment, allocation, selection, transaction and risk. 

Stage 1: Market assessment

To assess market conditions, we take a 360-degree view to identify key factors that influence the investment strategy, focusing on areas such as: i) the macroeconomic environment, including monetary and fiscal policies, ii) the political environment, both in the short-term and long-term, iii) sustainability trends, iv) indicators of market sentiment, such as volatility, and v) technical factors, such as market flows or issuance activity.

The fund employs strategic and tactical risk allocations and is populated with bottom-up views, drawing on a mix of quantitative and qualitative research inputs. When making decisions for the portfolios, we combine fundamental and ESG research, with powerful proprietary quantitative tools and specialised trading inputs. We then debate and discuss the focus areas to assess market trends, investor sentiment and the potential catalysts for change, arriving at the overall risk appetite of the portfolio.

The process is formalised via the use of scorecards, generating indicators for the outlook of each asset class across rates and credit. The results then form the strategic anchor of the portfolio, over which tactical views and best ideas at a security selection level are later implemented. 

Stage 2: Allocation

Based on our market assessment, we define where and how we want to allocate risk. The Strategic Asset Allocation (SAA) provides a framework to understand our risk appetite relative to a 'neutral' risk stance in terms of duration, credit risk and volatility. We then have the flexibility to tactically shift risk exposures around this starting point depending on market views and whether the team sees short-term value in a certain opportunity. To do this, we draw on the team’s expectations for interest rates and credit spreads, and our level of conviction in those expectations. We then decide the desired balance between duration and credit risk. Once we have decided on targets for the fund’s volatility, duration, and credit risk, we will begin to look for high conviction trade ideas from across the investment teams to populate the portfolio.

Our targets for duration and credit risk shape the asset allocation decision, by which we mean the decision to invest in government bonds, inflation-linked bonds, investment grade corporate bonds, high yield or emerging market debt, among others. The asset allocation mix is primarily dictated by top-down views from the SAA and our current risk appetite, but can also be influenced by the best ideas from our analysts. 

Research and screening approach

Stage 3: Selection

Once the risk allocation has been defined, the investment team utilises a bottom-up approach to identify and select the best ideas for the investment strategy. Investment ideas are predominantly generated between the Portfolio Managers, credit research, quantitative research and trading. Investment views will incorporate fundamental, sustainability and quantitative analysis, legal analysis of bond structures, market flows and relative valuation to make an informed decision. The key advantage of incorporating the views of multiple groups of experts is twofold: Firstly, it allows us to uncover a broader range of investment opportunities as each group makes recommendations based on a different skill set and approach to the market. Secondly, this approach facilitates a robust mechanism to challenge ideas. Views are debated from various angles, which provides the Portfolio Managers with additional perspectives when making investment decisions. 

Steps of the Selection process

i.Credit research

Fundamental credit research forms the basis of the strategy’s investment process. The Credit Research Team consists of 36* individuals based globally. Fidelity operates a career analyst model with the credit team consisting of a blend of home-grown talent (primarily through the graduate program) and experienced hires.

Credit research analysts are sector specialists, which means their coverage spans geographies, capital structures, ratings and crosses both developed and emerging markets. This provides uninterrupted coverage when a credit makes the transition between high yield and investment grade, or when a merger or acquisition takes place and the target company is re-domiciled. It also ensures analysts have in-depth knowledge of the entire sector and global supply chain. Combined with the research shared from our equity colleagues, this ensures that our analysts have an information advantage over competitors.

Our investment analysts have overall responsibility for analysing the ESG performance of the companies and buildings in which we invest, however, Fidelity also has a dedicated global Sustainability Team that works closely with the investment teams and is responsible for consolidating Fidelity’s approach to stewardship, engagement, ESG integration and the exercise of our votes at general meetings.

Our open architecture promotes constant engagement and debate across the entire investment team, with analysts having full visibility on the various investment strategies. The collegiate approach also allows us to learn from each other, create a common language for all members, and build what we believe to be a sustainable investment process that can achieve persistent performance through bottom-up security selection.

*Source: Fidelity International, as at 31 March 2024. Excludes investment graduates and includes Toronto-based analysts, who are part of Fidelity Canada Investment Management (FCIM). FCIM is an affiliated entity of FIL Limited.

The credit research framework incorporates a fundamental assessment, thorough ESG analysis and finally an investment recommendation, described as follows:

a.Fundamental assessment

The sovereign and corporate analysts first provide a fundamental assessment of a country or company’s financial health, resulting in a proprietary credit rating score and outlook. The scale, from AAA to D, is analogous to that of the official rating agencies, although our ratings often differ from the third-party agencies, primarily because ours are more forward looking. Experience has taught us that credit agency ratings are not always timely, tend to be reactive and often reflect obsolete market conditions. The analysts also provide an outlook for the credit profile alongside their fundamental rating to capture any potential improvement or deterioration in the issuer’s balance sheet. However, their ratings and watch lists can serve as a guide, and highlight inefficiencies.

At Fidelity, we believe that socially responsible investing helps to protect and enhance investment returns. Consequently, in conjunction with fundamental analysis, our research process takes ESG factors into account as these can have a material impact on investment performance. Particularly for Fixed Income, where returns are asymmetric, ESG factors present a key sources of downside potential.

For this reason, we launched our proprietary ESG ratings over the course of 2019. Comprising of Fidelity’s equities and fixed income coverage universe of over 4,100 issuers, the sustainable ratings leverage Fidelity’s extensive research capabilities and ongoing engagement with management teams to provide a forward-looking evaluation of a company’s performance and trajectory on ESG-related issues. As our analysts have relationship with C-suite management, visit companies in person and engage with them on an ongoing basis, we feel they are in the most informed position to judge a company from ESG perspective. Our ratings are cross-asset, meaning that our credit analysts and equity analysts, supported by the ESG Team, jointly determine the rating as a forward-looking assessment for the company. This removes subjective bias from the rating process and fosters communication if an analyst wants to change a rating.

The ratings framework divides the investment universe into subsectors, each with industry-specific criteria. For each subsector, the rating focuses on 5 to 10 material ESG issues, selected by the ESG Team and the analysts based on their relevance, materiality and forward-looking nature, against which the issuer is assessed relative to its peers, using an A to E rating, with C being the sector’s average. Whilst an equally-weighted average of the issue-level ratings is automatically provided, analysts have discretion to override the overall rating if they consider that one particular issue may be more prevalent for a company. As the ratings are designed to generate a forward looking and holistic assessment of ESG risks and opportunities, we also ask our analysts to qualify the direction of change of companies’ ESG performance: positive, neutral or negative trajectory. The ratings are then reviewed at least annually but may also be updated on an ad-hoc basis, following a change of policy or an exceptional event at the company.

Examples of ESG factors that our investment teams may consider as part of their company and industry analysis include:

• Changes to regulation (for example, Greenhouse Gas (GHG) emissions restrictions, governance codes).
• Physical threats (for example, extreme weather, climate change).
• Cost implications (for example, arctic mining, product recalls, fines).
• Brand and reputational issues (for example, poor health and safety record, weak labour practices).
• Supply chain management (for example, observation of health, safety and human rights provisions and compliance with the provisions of the Modern Slavery Act).
• Gaining access to raw materials (for example, security of oil supply, conflict minerals, bribery and corruption).
• Product evolution (for example, low energy products, renewable energy).
• Shareholder rights (for example, election of directors, capital amendments).
• Corporate governance (for example, Board structure and diversity, executive remuneration).
• Environmental performance data of buildings (for example, energy and water consumption, GHG emissions and waste).
• Work practices (for example, increase in fatalities, lost time injury rates, labour relations).

The ESG ratings and full company reports are included on our centralised research platform, Fidelity Insight, an integrated database, so that each analyst has a first-hand view of how each company under their coverage is rated according to ESG factors. Moreover, our ratings are included in analyst research notes, which are published internally and form an integral part in the decision-making stage of our investment process. A summary of Fidelity’s ESG framework is located below:

b.Investment recommendation

The last stage of the process involves the analysts applying a ‘recommendation’ in the form of a relative value rating to the issuer, as well as individual bonds outstanding. This ranges from a buy to a sell (1 to 5). The recommendation is designed to inform the Portfolio Managers and help them build conviction. If, for example, a specific bond has rallied significantly in recent months, the relevant analyst might decide to change the relative value of the bond (from buy to sell), but keep the fundamental and ESG rating at an issuer level unchanged. Our credit analysis focuses on the probability of default, given both financial and non-financial factors (and the loss given default), whereas our relative value analysis focuses on relative price/attractiveness, liquidity and the risk premium.

The Portfolio Managers continuously review these issuers theses and price targets, and adherence to investment guidelines as well as the ESG characteristics of holdings within the fund. This includes actively engaging with companies and meeting with senior management representatives.

ii.Quantitative research

The Tactical Quantitative Research Team's approach to trade idea generation is to aim to create ideas, models, scorecards and overlays that are back tested, uncorrelated, timely, automated, and unbiased:

Back-testing: By rigorously testing against historical data, the team aims to;

Rapidly distinguish trading strategies with potential from those that don’t add value.

Set position sizes based on historical data and worst-case drawdown scenarios.

Identify strategies that continue working in diverse environments - both in Quantitative Easing (QE) and non-QE environments or different parts of the macroeconomic cycle.

Diversification: Quants identify, recommend and monitor multiple signals across many different asset classes and from many different sources for a large number of instruments. Combining uncorrelated strategies from areas as different as momentum, mean-reversion, seasonality and yield curve slope reduces risk for a given alpha.

Data: Quants can take advantage of massive data sets. We take into account a wider range of data inputs on every bond in our universe and unearth less-obvious relationship than manual analysis can.

Automation: With increased automation of data processing and analyses, quants can update the analysis of every asset every day. Missed opportunities from delayed analysis as well as mistakes from human error can be reduced using quantitative strategies, and quantitative screens can funnel pre-screened high-potential opportunities to specialists in the Credit Analyst Team for deeper review.

Reduction of behavioural biases: Quantitative strategies can mitigate or eliminate the behavioural biases of manual investing by making the assumptions in our investment process more explicit and by imposing structure on the investment process – and they can help us exploit the biases of other market participants.

iii. Trading input

A key distinction of our fixed income approach is that traders provide the Portfolio Managers with market intelligence, flow information and trade recommendations. Traders are dedicated by asset class which is especially important for markets affected by seasonal liquidity and influenced by technical trends. They ensure efficient and low-cost execution, in addition to providing idea generation based on their market knowledge and experience. The trader’s participation in any pre-trade discussion is vital, as they will know where to source (or find bids) for bonds and will offer alternative trade ideas if the proposed trade pricing becomes prohibitive. Ideas generated by the team tend to be either short-term tactical trades, typically where the idea is flow-driven based on a pricing anomaly, or longer-term and strategic trades, gained through insight from meetings with official institutions such as central banks and issuing agencies.

Traders are also integral to the new issue process, forming opinions on new issue demand, premium and success of a deal. In doing so, traders work in close collaboration with the Portfolio Managers, credit and quantitative analysts to formulate an investment thesis.

Stage 4: Transaction

Transactions are directed by the Portfolio Managers through a global trading platform and implemented by a group of specialist traders in conjunction with the Portfolio Services Group (PSG). There is continuous dialogue between the Portfolio Managers, the traders and PSG as execution is often contingent on market levels. This structure has been established to enable traders to build strong external counterparty relationships, which is crucial for assessing market liquidity and ensuring best execution. PSG further supports the risk management and implementation process by actively monitoring fund investment guidelines and other requirements, such as pre-trade compliance reviews. In addition, the team has different reporting lines, which contributes to the reduction in the overall operational and execution risk by providing an additional and independent layer of control.

Overseeing every transaction is Compliance. The team is responsible for ensuring compliance rules are appropriately maintained and adhered to. They act as a second line of defence against portfolio breaches via rigorous end-of-day testing. Their expertise provides a framework within which the Investment Team can manage complex and bespoke portfolio requirements.

Stage 5. Risk

Portfolio Managers are responsible for building portfolios that are consistent with the risk expectations and investment guidelines of our clients. The balance of risks and positions within a portfolio are analysed daily through the Fund Manager Workbench system. This proprietary tool enables the sources of risk within a strategy to be rigorously analysed and trades to be sized. Our preferred measure of risk for credit portfolios is Duration Times Spread (DTS), but the system also monitors ex-ante tracking error, spread duration and the (real and nominal) interest rate duration of a portfolio, down to the bond and issuer level. It allows a portfolio to be analysed by principal term structure components, as well as by credit rating, industrial sector, derivative and currency exposures. As new trade ideas are communicated to the Portfolio Manager by the relevant analyst, new strategies can be tested within the portfolio through this system.

Investment risk management is an integral part of the investment culture and process. Essentially, our risk processes follow a three lines of defence model in adherence with a robust risk management framework.

First level

Investment team: Portfolio Managers use desktop risk management systems on a daily basis to analyse risk within portfolios. Reports typically include measures of tracking error, volatility, concentration, credit quality and other relevant measures.

Portfolio Managers are responsible for building portfolios that are consistent with the risk expectations and investment guidelines of our clients.

Portfolio Construction and Risk Team: This team helps Portfolio Managers understand and manage the risks associated with their portfolios through the provision of reporting and expertise.

Quarterly Fund Review (QFR): The Chief Investment Officer (CIO) / head of asset class meets with Portfolio Managers to discuss their respective portfolios in detail. During the meeting, factors such as the portfolio’s structure, turnover, trading activity, risk profile, performance, and level of active money are analysed.

Quarterly Sustainability Review (QSR): The QSR is designed to place additional scrutiny on the way that sustainability factors are being integrated and monitored at the fund level. A wider and deeper review of ESG factors, as well as our stewardship activities (including engagement and voting) will thus be formally performed on a quarterly basis.

Second level

Investment Risk Team: This team ensures that material investment risks are adequately covered and understood by senior management and the board. The team provides risk metrics to support Compliance, senior management and other stakeholders.

Compliance: This function reviews all trades daily for asset eligibility and to ensure portfolios stay within their investment parameters. It also monitors trades to ensure best execution in the market, including appropriate pricing and timeliness.

Furthermore, Fidelity operates a network of shared first and second line Investment Risk Committees (IRCs) across the firm to support each asset class and specific investment management teams.

Fund Counterparty Risk Committee (FCRC): The FCRC is responsible for ensuring all risks associated with derivatives and counterparty exposures are continuously assessed and that an appropriate control environment is implemented by line management.

Fund Liquidity Risk Committee (FLRC): The FLRC is responsible for reviewing appropriateness of risk mitigations when Fidelity’s funds exceed agreed internal liquidity thresholds as well as reviewing and approving the Fund Liquidity Risk Framework.

Third level

The Internal Audit function provides an independent review of all risk functions as per regulatory requirements.

Resources, Affiliations & Corporate Strategies:

As an investment manager, we have a fiduciary duty to act in the best interests of our clients. In the context of sustainable investing, we have developed an approach with three key components (integration, stewardship, and solutions) that aim to provide our clients with investment offerings that meet their financial and non-financial objectives, and to comply with rapidly evolving sustainability regulations for product labelling and disclosure.

Fidelity’s sustainable investing approach is established on the foundation of our integration tools and processes. We believe ESG factors should be integrated into different investment processes. We have designed ratings and tools to identify the relevant risks and opportunities of issuers and established other processes to ensure that ESG factors are integrated consistently in our portfolios. We will also consider research insights from third-party data providers where relevant.

Our integration tools and processes also support the prioritisation of stewardship activities and the development of solutions that meet different regulatory requirements and client objectives. While sustainability ratings and scores allow for easier comparison of company performance, sustainability analysis should be both quantitative and qualitative and its findings should be interpreted in the context of financial performance to provide a holistic picture of a company’s performance.

Proprietary ratings and tools sit at the heart of Fidelity’s sustainable investing approach. They build on Fidelity’s heritage of fundamental research, the contribution from investment analysts and the expertise of the Sustainability Team. These tools include:

ESG Ratings: an assessment of management and mitigation of ESG risks

The Fidelity ESG Ratings aim to provide a forward-looking assessment of the extent to which an issuer’s performance on material sustainability issues either supports, or is likely to impair, long-term value creation for shareholders. The ratings are differentiated in their forward-looking emphasis and their use of issuer interaction and due diligence by Fidelity’s fundamental analysts as the main input to identify and assess the material ESG risks impacting an issuer. 

Our ESG Ratings are integrated into Fidelity’s investment process and are available to all members of the investment team on our internal research platform. Our rating serves as an additional source of insight and as a tool to support investment decisions.

Our ratings comprise a combination of E, S, and G indicators that aim to address the most material issues in each sector, providing a forward-looking view of an issuer’s ESG practices. The ratings’ methodology reflects the evolution of Fidelity’s ESG integration approach, founded on the principle of ‘double materiality’, focusing on ESG both from a business risk perspective and in terms of the environmental and societal implications of the issuer’s operations.

Four key principles underpin our ESG Ratings:

• Consideration of both non-financial and financial impacts ('double materiality'). A focus on absolute impacts allows comparison across sectors and geographies.
• Providing a forward-looking perspective that is complementary to our financial forecasts, helping to inform the long-term prospects of an individual issuer. 
• Consideration of material impact across more than 100 individual subsectors for a more focused and relevant set of indicators.
• Flexible output for different use cases. Individual E, S, and G scores provide guidance for determining an overall ESG score at the issuer level and trajectory ratings.

Our ESG Ratings framework is reviewed regularly to help identify the most material ESG factors for each sector. We aim to provide training on the ratings framework as it evolves and on specific themes and sectors to help enhance understanding of the material ESG factors required for analysis, and to enhance the quality and consistency of ratings. The in-depth nature of our approach means that our coverage is not as broad as a third-party provider, therefore we also use external research and rating providers, such as MSCI and Institutional Shareholder Services (ISS), to complement our internal research process and for the construction of our funds with specific sustainability objectives. Where possible and practical, we aim to use our own ESG ratings as a preferred data source for fundamental insight and measurement of product-level characteristics.

Climate Ratings: alignment to the outcome of net zero carbon emissions by 2050

Our Climate Ratings assess an issuer’s operational alignment to the objectives of the Paris Agreement, providing a holistic view of climate-related risks and opportunities.

To facilitate our assessment of an issuer’s net zero transition, we have developed a Climate Rating that assesses an issuer’s operational alignment to the objectives of the Paris Agreement (to limit global average temperature rise this century well below 2°C and to drive efforts to limit the temperature increase even further to 1.5°C above pre-industrial levels). The Climate Rating is designed to be used in conjunction with our other ESG and climate tools to provide a more holistic view of an issuer’s exposure to climate-related risks and opportunities. 

Assessment criteria cover three key areas: 

• Carbon emissions disclosure: This assessment focuses on disclosure of Scope 1, Scope 2 and material Scope 3 (based on the definition of the Greenhouse Gas (GHG) Protocol). 
• Emissions reduction targets: This assessment concentrates on the issuer’s current emissions, net zero GHG emissions ambitions, targets and carbon reduction targets. 
• Climate governance: This assessment analyses executive remuneration plans linked to climate ambitions; governance responsibilities for climate at executive level; and board committees with responsibility for oversight of climate change policies. 

For high impact sectors, additional criteria may be included to take into account the unique requirements of certain hard-to-abate sectors in relation to achieving net zero. The Climate Rating does not rely on a single climate change model or scenario. The assessment undertaken takes into account a wide range of data sources including companies’ disclosure, inputs from the Carbon Disclosure Project (CDP), ISS Climate data (e.g., Implied Temperature Rise), and the Science Based Targets initiative (SBTi).

SDG Tool: an assessment of positive contribution to the UN Sustainable Development Goals (SDGs)

Fidelity’s SDG Tool aims to provide an assessment of an issuer’s positive contribution to environmental and social outcomes. It is intended to complement Fidelity’s ESG Ratings which provide an assessment of an entity’s management of adverse impacts arising from ESG issues. The SDG Tool also supports Fidelity’s definition of ‘sustainable investments’ under Europe’s Sustainable Finance Disclosure Regulation (SFDR). We aim to provide a separate analysis of the positive and negative issues an issuer may be exposed to, to help prevent the signal value from identifying a risk being offset by an unrelated positive contribution (e.g., poor corporate governance and a catastrophic tailing-dam failure are not mitigated by selling products that help the energy transition).

Primary use cases for the output of the model are: 

• Issuer and entity-level assessment: The model provides an assessment of the percentage of an issuer’s revenue that contributes to each SDG. This can be used as an input to help define a thematic investment universe. 
• SFDR: Under SFDR, there is a requirement to identify issuers that make a positive contribution to an environmental or social outcome and can qualify as ‘sustainable investments’. The SDG Tool is a key input in this process. 
• Reporting: The SDG Tool provides the ability to report the contribution of a fund’s investments to the SDGs to our clients on a consistent and scalable basis

Quarterly Sustainability Reviews (QSR): an internal forum to review relevant quantitative and qualitative metrics and discuss sustainability integration in specific strategies

The QSR is a component of the Quarterly Fund Reviews (QFRs) which cover performance risk, liquidity, etc. The QSR is a quantitative and qualitative exploration of a product’s sustainability profile, and may include aspects such as ESG ratings, engagement activity, climate characteristics, impact indicators and other datapoints. Attendees may include representatives from the Sustainability Team, the asset class CIO, portfolio manager(s), and risk professionals. The discussion is supported by a data pack which draws together various ESG data sources. The targeted scope of QSRs is actively managed products with a higher level of ESG integration, which may include certain EU SFDR Article 8 and Article 9 products, and UK SDR Labelled and ESG Promoted (unlabelled) products. Products disclosing under SFDR Article 6 are not subject to the QSR process. SI-related investment mandates could be covered by QSR on an optional basis or at the request of clients.

Our integration tools and processes also support the prioritisation of stewardship activities and the development of solutions that meet different regulatory requirements and client objectives. Furthermore, we promote active ownership as the stewards of our clients’ assets, supporting real world sustainability outcomes that help us to fulfil our fiduciary duty. Effective and outcomes-focused stewardship combines bottom-up corporate engagement, top-down thematic engagement, and system-wide stewardship. This approach is essential to drive change and encourages regular engagement and dialogue which we believe is more efficient than exclusions because this simply diverts the problem elsewhere. We believe that monitoring the progress of engagements is as important as initiating them to assess change over time. The outcomes (or lack of outcomes) resulting from our engagements can be reflected by investment analysts in our ESG ratings and used to inform investment decisions. Our Voting Principles and Guidelines sets out our minimum expectations for our investee companies in key areas including climate change, deforestation, and gender diversity. 

For further details, please refer to our Sustainable Investing Principles sustainable-investing-principles.pdf. 

Sustainability Team

As an active bottom-up research house, we have always looked beyond financial reporting to gauge the value of an investment. This involves maintaining ongoing dialogue with investee companies, staying vigilant to the evolving regulatory landscape, and monitoring other factors that could influence sustainable cash flows over our investment horizon, including those currently categorised as ESG. We began formally integrating ESG considerations into our investment and research processes since becoming a signatory to the Principles for Responsible Investment in October 2012. 

As a logical consequence of our focus on sustainability, we established our Sustainability Team over a decade ago. Initially a small group based in London, the team has now grown to include 30* professionals with the global presence spanning London, Singapore, Tokyo, Hong Kong, Shanghai, Sydney and Luxembourg. Members of our Sustainability Team bring a diverse skill set, including expertise in research, climate science, and governance, with many boasting over a decade of experience.

*Source: Fidelity International, as at 31 December 2025.

The team’s scope now encompasses a wide range of activities related to ESG integration, engagement, policy, product development, sales and marketing, proxy voting as well as corporate sustainability. New members have contributed additional skills in legal and thematic areas, client and distribution expertise, and governance. 

The Sustainability Team functions across Fidelity in several ways:

• Collaborates closely with the broader investment team, supporting analysts in producing ESG research and conducting company-specific engagements, driving thematic engagement outcomes with sector analysts' input, and assisting portfolio managers in integrating ESG into their investment processes through proprietary tools, training, and frameworks.
• Works in tandem with the product team to develop sustainable investing frameworks and strategies in compliance with ESG regulations and tailored to diverse investor needs.
• Assists client-facing teams and clients with sustainable investing requirements and needs, including client communications, questionnaires, reporting, and training.

The team continues to evolve based on Fidelity's sustainable investing strategy, ensuring comprehensive support for all business areas and improving the quality and outcomes of engagement across asset classes.

Industry collaboration

Fidelity recognises the importance of networks and information platforms for sharing tools and pooling resources, using investor reporting as a source of learning. Our Sustainability Team keeps its current and potential membership of investor organisations under constant review. We monitor all international treaties, supranational organisations and other sustainability memberships to ensure we are up to date with market trends and to stay involved in the debate. We are proactive in strengthening our links within the investment industry, to determine effective ESG initiatives, maintain ethical standards, and attend seminars and conferences to integrate ESG into the investment process. Additionally, our Sustainability Team speaks publicly at industry events on responsible investment practices and promotes transparency in corporate governance issues. Please refer to the following list of our memberships, affiliations and signatories, listed by category:

Social Disparities

• 30% Club Australia (2021)
• 30% Club Hong Kong (2022)
• 30% Club Investors Group (2020)
• 30% Club Japan (2019)
• 40:40 Vision (2020)
• Armed Forces Covenant (2019)
• BBBA Talent Accelerator (2020)
• Business in the Community, Race at Work Charter (2020)
• Diversity Project (2017)
• DWP Disability Confident Scheme (2022)
• Find it, Fix it, Prevent it (CCLA) (2020)
• Global Business Collaboration Leadership Pledge (2022)
• If not now, then when? Campaign on Racial Diversity (2020)
• Investor Initiative on Human Rights Data (2024)
• Investors Against Slavery and Trafficking Asia-Pacific (2020)
• Investor Alliance for Human Rights (2025)
• Lord Mayor's Appeal - We Can Be (2019)
• LGBT Great (2019)
• Luxembourg National Diversity Charter (2020)
• Mental Health First Aid Training (2017)
• Minority Supplier Development UK (2020)
• Mindforward Alliance (2022)
• OutBritain (2022)
• President’s Challenge Enabling Employment Pledge and Enabling Mark (2023)
• PRI Reference Group on Human Rights and Social Issues (2025)
• Progress Together (2022)
• Purple Space (2019)
• Social Mobility Foundation (2021)
• Social Enterprise UK (2021)
• Stonewall (2016)
• Talent-Wise Employment Charter and Inclusive Organisations Recognition Scheme (2022)
• UN LGBTI Standards of Conduct in Business (2019)
• Valuable 500 (2019)
• Veteran-owned UK (2021)
• WEConnect International (2021)
• Women in Finance Charter (2017)
• WorkWell Leaders (2023)
• #10000 Black Interns (2020)

Climate Change:

• Asia Investor Group on Climate Change (2020)
• CDP - formerly Carbon Disclosure Project (2019)
• China Climate Engagement Initiative (2023)
• Climate Action 100+ (2019)
• Climate Bonds Initiative (2019)
• Coalition for Climate Resilient Investment (2019)
• Financial Services Development Council (2022)
• Global Standard on Responsible Corporate Climate Lobbying (2022)
• Green Finance Industry Taskforce Singapore (2020)
• Glasgow Financial Alliance for Net Zero (2021)
• Institutional Investors Group on Climate Change (2020)
• Investor Group on Climate Change (2021)
• Net Zero Asset Managers Initiative (NZAMI) (2020)
• One Planet Asset Manager Initiative (2021)
• Partnership for Carbon Accounting Financials (2022)
• Point Zero Carbon Programme (2022)
• Powering Past Coal Alliance (2021)
• Singapore Sustainable Finance Association (2024)
• Transition Pathway Initiative (2021)
• UK Sustainable Investment and Finance Association (2010)

Good Governance:

• Asia Securities Industry and Financial Markets Association (2015)
• Asian Corporate Governance Association (2004)
• Assogestioni (2007)
• Corporate Governance Forum (2009)
• European Sustainable Investment Forum (2017)
• European Public Real Estate Association (2023)
• Hong Kong Green Finance Association (2020)
• Hong Kong Principles of Responsible Ownership (2017)
• International Corporate Governance Network (2005)
• Investment Association (2010)
• Investor Agenda (2021)
• Investor Forum - UK (2014)
• Japanese Stewardship Code (2014)
• Principles for Responsible Investing (2012)
• Responsible Investment Association Australasia (2020)
• Taiwan Stock Exchange’s Stewardship Principles for Institutional Investors (2016)
• Transition Finance Council (2025)
• UK Stewardship Code (2010)
• World Benchmarking Alliance (2020)

Nature Loss:

• Ceres - Valuing Water Finance Initiative (2022)
• Farm Animal Investment Risk and Return (2020)
• Finance for Biodiversity Pledge (2021)
• Green Praxis Biodiversity (2022)
• Investor Policy Dialogue on Deforestation (2024)
• Natural Capital Investment Alliance (2021)
• Nature Action 100 (2023)
• Taskforce on Nature-related Financial Disclosures Forum (2021)
• Finance Sector Deforestation Action (2021)

SDR Labelling:

Not eligible to use label (out of scope)