Fidelity launches global fund to capture opportunity from climate solutions

Sep 07, 2021
‘The world needs to decarbonize urgently,’ says lead portfolio manager Velislava Dimitrova

Fidelity International has launched a new fund that invests in companies supporting the shift to a low-carbon economy.

The Fidelity Funds – Sustainable Climate Solutions Fund will have a global remit and focus on products and services helping to limit global warming, such as electric cars, renewable energy, industrial automation and green hydrogen.

The fund will be run by lead portfolio manager Velislava Dimitrova and co-portfolio manager Cornelia Furse. Dimitrova and Furse are experienced in thematic investing and already co-manage the Fidelity Sustainable Water & Waste Fund.

‘Climate change has prompted decarbonization policies around the world to help achieve global carbon-neutrality. The world needs to decarbonize urgently, at a faster pace than we have seen to date, and investors can play a major role in supporting this change,’ says Dimitrova in a statement.

‘Unlike other climate funds, we focus on carbon reduction, not carbon avoidance,’ adds Furse in the statement. ‘Investing in low-emission sectors will not be enough to reverse 150 years of rising greenhouse gas emissions. Our fund will identify and invest in existing and emerging solutions that help decarbonize society.’

The fund will hold around 40-60 companies and a minimum of 70 percent of assets will need to be invested in securities that have ‘sustainable characteristics’ as defined by Fidelity’s sustainable investing framework.

In recent years, an increasing number of companies have pledged to achieve net-zero emissions by 2050 to help the world meet the Paris Agreement climate goals and limit global warming to 1.5°C.

But there are questions about whether companies are making bold-enough commitments. In a survey of Fidelity analysts published earlier this year, around half of respondents globally say companies need to adopt tougher targets to achieve net-zero emissions by 2050.

Fidelity analysts also say that, in most sectors, the opportunities arising from the energy transition now outweigh the risks. Survey respondents say utilities currently has the most opportunities, followed by industrials and materials.

Institutional investors have encouraged companies to take action through a range of projects, such as the Net Zero Asset Managers Initiative and Climate Action 100+, which focuses on the world’s biggest emitters.

Investor focus on climate change has helped drive a huge growth in thematic investing, where investments will benefit from a trend such as renewable energy or cloud computing. During 2020, thematic ETFs in Europe attracted a record €9.5 bn ($11.3 bn) in inflows, according to data from Morningstar.

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