Fidelity is a financial services corporation based out of Boston, Massachusetts. It is one of the largest asset management groups in the world with nearly $10 trillion in total customer assets. Fidelity offers a range of ESG centered funds including the Fidelity Women’s Leadership, an actively managed US equity fund focused on women development and leadership.
ESG metrics need improvement before you can rely on their labelings. This fund does well at achieving its objective, but I’m worried some of the holdings do not focus enough on environmental preservation. Overall, I think Fidelity needs to be more transparent on their values and ESG integration.
The Fidelity Women’s Leadership Fund is composed of 128 holdings with the top ten holdings harnessing 17.91% of the fund. The fund covers a broad range of market sectors, but the most represented sector is information technology. Some of the holdings include Microsoft, Disney, Salesforce, Adobe, and Apple. The fund is primarily invested in US based companies, but it does represent a portion of other regions (mostly in Europe). The fund has moderate risk due to its foreign market holdings, but I don’t think it’s anything to be concerned about seeing as it's a primarily US based fund. Because the fund’s inception was in May of 2019, it’s still early to say if it is a very safe investment, although it has surpassed its high point from the beginning of the COVID-19 pandemic and it seems to be increasing.
It’s hard to say this is a completely sustainable fund because it is more focused on holdings that improve women's leadership than environmental conservation. The fund has a great goal, and I think it does well at achieving its objectives. According to MorningStar, the fund gets a 20.33 ESG rating indicating it has a low ESG risk. Some of the holdings, such as Microsoft, do a great job at being sustainable but others, like Apple, still need a lot of improvement (see Apple- iPhone 11 review). Although the FWOMX fund doesn’t target sustainability specifically, women’s leadership development is an important aspect in achieving a truly sustainable society. Women are typically more affected by environmental degradation, and they play a significant role in managing natural resources. Because of their low ESG rating and dedication to women’s leadership, I would give them 1.75/3 planets. Also there are many factors to consider when becoming a sustainable society.
Because the FWOMX fund is dedicated to women’s leadership development, there are specified criteria the holdings must meet to be considered for the fund. For a company to be considered, it must (1) have a woman on the senior management team, (2) women must represent ⅓ of the board of directors, and (3) have policies that attract, retain, and promote women in the company. The third criteria is based on the adviser’s opinion, so there’s not much information that signifies how a company is meeting this point. The fund is part of Fidelity’s thematic ESG offerings. The thematic ESG options focus on “long-term themes broadly tied to specific areas of sustainability.” I don’t like how they used the word “broadly” because it signifies to me the themes of the funds are not that important, and there's no real criteria a company must meet to be incorporated into the fund. ESG funds look at risk exposure to environmental, social and governance factors, so the holdings in this fund may have low risk in each of these areas, but it doesn’t mean the companies are doing their very best to solve any of these issues.
I think ESG integration, transparency and expectations need to be improved in order for this fund to be made fully sustainable.
The FWOMX fund is actively managed by Nicole Connolly. Nicole is the head of ESG investing and works in the equity division at Fidelity. She has been at Fidelity since 2000 and has extensive experience working in the equity division of the healthcare, energy, and technology sectors among others. It seems as though Connolly has always been interested in the social and environmental sectors of investing.
Fidelity focuses on having an inclusive and equitable workplace. They hire and develop employees to reflect their values, however other than stating they want to be a diverse workplace, they do not provide other values they believe in or focus on at Fidelity. Because of this, it’s hard to gauge exactly what diverse and equitable means to them and how they want to achieve this. They do provide specialized employee groups to provide inclusive environments but the rest of their initiatives are broadly written and don’t provide much information. They encourage employees to volunteer and they set up a program called Fidelity Cares to do this. Through this program, Fidelity hosts several volunteer events for different causes. I wish they provided more information on their website about this program because I think it is something future employees would be interested in. In the past, Fidelity has come under some scrutiny about their enterprise Fidelity Charitable. Fidelity Charitable sits as a middle ground between donors and their final charity. Donors put their money into donor-advised funds (DAFs) where they can keep it tax-free until they want to send it to their charity of choice. Fidelity Charitable faces a conflict of interest here because it makes the most financial sense for them to keep high sums of money in there for a long period of time because they pay investment fees to Fidelity Investments. Because of this, people scrutinize Fidelity and say they are using the enterprise as a profit center and not a means to make noticeable differences. This is a tricky situation, and it’s hard to determine Fidelity’s ultimate motive for the enterprise. Overall, I think Fidelity needs to improve their transparency when it comes to social equity causes and employee programs.