Fidelity Launches Three New ESG ETFs

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Stockholm (NordSIP) – Fidelity International has announced the launch of three new ESG ETFs focusing on sustainable equity investments across American, European and global markets.

The Fidelity Sustainable Research Enhanced US Equity UCITS ETF is benchmarked against the MSCI USA Index. The European ETF, Fidelity Sustainable Research Enhanced Europe Equity UCITS ETF tracks the MSCI Europe. Finally, Fidelity benchmarks the performance of its Sustainable Research Enhanced Global Equity UCITS ETF against the MSCI World Index. Fees will range between 0.3% and 0.35%, and the tracking error across the three ESG ETFs is not expected to exceed 2%.

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“These new ETFs provide an enhanced beta exposure by leveraging both our proprietary ESG ratings and our fundamental research insights to select and weight securities, whilst seeking to capture the characteristics of the broader market,” Nick King, Head of ETFs, Fidelity International, said. “We believe these are cost-effective and differentiated products aligned to the needs of ESG conscious investors.”

The ESG ETFs will invest in 250 to 500 stocks and are built in what is now a familiar manner. Taking the original investment universe of their benchmarks, the fund manager applies some negative screens that exclude companies that have been identified to violate global norms such as human rights and those that operate in controversial fields such as tobacco, controversial weapons. Next, the portfolios of the ESG ETFs are biased in favour of companies that are shown to be best in class regarding ESG scores, which are calculated based on both proprietary and third-party sources. Where these three Fidelity ESF ETFs stand out from the rest is that despite this methodology, portfolio managers can exercise discretion regardless of the recommendations generated by this process. This discretion creates a level of subjectivity which other ESG ETFs attempt to avoid raising questions about their original commitment to sustainability.

“These new ETFs provide an enhanced beta exposure by leveraging both our proprietary ESG ratings and our fundamental research insights to select and weight securities, whilst seeking to capture the characteristics of the broader market,” Nick King, Head of ETFs, Fidelity International, said. “We believe these are cost-effective and differentiated products aligned to the needs of ESG conscious investors.”

Jenn-Hui Tan, Global Head of Stewardship and Sustainable Investing, Fidelity International, added, “Sustainable investing has proven to be one of the most significant shifts in asset management in a generation, heightened by increasing evidence that ESG investing can enhance financial returns. This trend was reaffirmed in our own research where stocks with higher ESG ratings outperformed lower rated stocks during the recent Covid-19 induced market sell-off.

“Public awareness of environmental issues has never been greater, and ETFs are an increasingly efficient way for investors to incorporate sustainable investment objectives into their portfolios,” Lida Eslami, Head of Business Development, ETP and IOB, London Stock Exchange, commented.

Image by 272447 from Pixabay

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