Fidelity has expanded its product lineup by introducing a new environmental, social and governance (ESG) fund, which is called Fidelity Healthy Future Fund (FAPHX). FAPHX is an actively managed equity strategy that invests globally in companies that create products, services and technology aiming to increase people’s life expectancy and quality of life, as well as limit negative impacts on the environment. FAPHX will incorporate Fidelity’s historical ESG ratings framework and third-party ESG ratings in order to provide a full overview of a company’s or issuer’s sustainable business practices. Here’s what you need to know as an investor.
A financial advisor could help you create a financial plan for your investment needs and goals.
What Is Environmental, Social and Governance (ESG)?
Environmental, social and governance (ESG) frameworks are designed to analyze a company’s set of standards, which many socially conscious investors use to identify potential investments that fit their beliefs and lifestyles. As an example, the criteria can take into account how a company looks to protect the environment from climate change.
From a social perspective, ESG can provide an analysis of how a company treats its employees, how it gives back and interacts with the community in which it is located, and how it treats customers.
From a governance overview, ESG analyzes a company’s track record on matters such as quality of leadership, executive pay and its relationship to average employee pay, and benefits that are offered. Other criteria can include a company’s legal history, ranging from compliance to lawsuits, as well as diversity among its board of directors.
What Does FAPHX Invest In?
FAPHX normally invests at least 80% of its assets in equity securities of companies that Fidelity Management and Research (FMR) believes are working to do the following:
- Extend/improve life expectancy
- Enhance health and wellness in people’s lives
- Mitigate environmental impacts affecting health and wellness, in each case through the products, services or technology they provide
Companies included are those that contribute at least 50% of their revenues to products that focus on health care access, nutrition, disease treatment, fitness and wearables, or clean emissions.
“The pandemic has put the importance of overall health and wellness at the forefront of consumer consciousness, and we believe there are many factors that will continue to drive this global trend,” Pam Holding, co-head of equity and head of sustainable investing at Fidelity Investments, said in a statement.
This fund has two managers with Melissa Reilly and Paul Mcelroy at the helm.
How ESG Investing Connects With Company Success
As investors become more socially active and engage in products, services and technology that aim to benefit society as a whole, companies are being held more accountable to ESG standards.
A 2021 study by Simon-Kucher & Partners shows that 85% of shoppers are more concerned about ecologically friendly purchases than they were five years ago.
And with the launch of FAPHX, Fidelity continues to build on this ESG trend after launching five ESG funds in 2021.
“With this new fund, Fidelity offers investors the opportunity to gain exposure to the long-term movement of health and wellness through an actively managed sustainable strategy,” Holding said in the same statement.
As ESG investing standards become more mainstream, companies will have to adapt to the social climate demands of investors and consumers. According to Bloomberg Intelligence, assets in the ESG space are set to grow up to $50 trillion by 2025.
Tips for Investing
- Consider talking to a financial advisor about the potential benefits and drawbacks of using an ESG investment strategy. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- There are many ways to invest in ESG assets. One common investment includes mutual or exchange-traded funds. With this financial investment, you should make sure that the holdings are diversified enough to mitigate risk from one company or sector.
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