Expanded sustainable and impact investing options

Impact investing embodies the idea that one can “do well while doing good” with their investments. Meaning an investor can support causes important to them through their investments while also pursuing financial returns. It’s a broad concept that refers to everything from investing in organizations with an explicit social mission to avoiding investing in companies with practices that may have a negative impact.

The concept of impact investing, once primarily an approach taken by socially-driven foundations and the ultra-high net worth, now generates demand from all types of investors who have recognized the possibility of supporting social outcomes through investments. The acceleration of market demand has driven asset managers to broaden the universe of impact investment product offerings. According to the US SIF foundation¹ , $8.72 trillion were invested in impact-oriented strategies in the U.S. in 2016, which means that 1 out of every 5 dollars under professional management in the U.S. are in impact investments.

As universal benefits like availability of clean water and workplace equality gain attention, interest in impact investing continues to grow; in fact, there has been a 135% growth rate since 2012. These benefits include:

Competitive Returns

In the past, a common misconception existed that utilizing sustainable investments meant a sacrifice of returns. Morningstar recently released a study that sustainable funds, as a group, performed better than the overall fund universe in 2017 with 54% of sustainable funds ranking in the top half of their respective Morningstar categories.²

Alignment of personal values with investments

Sustainable investment strategies have the added benefit of providing real social and environmental benefits also. Investors can allocate assets to a sustainable investment option that focuses on a social benefit that aligns with their personal values.

Diversification and stabilization of broad asset allocations

In addition to competitive market returns, sustainable investments have also exceeded traditional investment peers on a risk-adjusted basis, across asset classes and over time periods. In fact, a recent Morgan Stanley report provided evidence that sustainable equity mutual funds had equal or lower volatility than traditional funds for 64% of the periods examined.³

Demand for impact investing options is not exclusive to taxable assets; individuals are as, if not more, likely to utilize impact investing options for their charitable dollars. Proof of this is seen by many of Fidelity Charitable’s donors that have asked for impact investing options for the charitable dollars in their Giving Account. As many of our donors maintain their Giving Accounts for some time, they want investment options that allow them to put their charitable dollars to work for social good while they decide which charities to support through grant-making. To meet this increased demand from our donors, Fidelity Charitable has expanded our investment pools offering to include a Sustainable and Impact Investing pool line-up.

Fidelity Charitable now offers our donors access to four different Sustainable and Impact Investing pools. The available options include:

• The Sustainable U.S. Index Pool, which looks to maximize exposures to companies with positive environmental, social and governance (ESG) factors, while providing investment results that correspond to the total return of the broad-based domestic equity ESG index, the MSCI USA ESG Index. This Pool invests in the Fidelity U.S. Sustainability Index Fund.
• The Sustainable U.S. Index Access Pool, which seeks a favorable long-term total return that reflects the investment performance of the overall U.S. stock market while giving special consideration to certain environmental, social and governance criteria. The strategy favors firms that are strong stewards of the environment, devoted to serving their communities, committed to high labor standards, dedicated to producing high-quality and safe products, and managed in an exemplary manner. This Pool invests in the TIAA-CREF Social Choice Equity Fund.
• The Sustainable International Index Pool, which looks to maximize exposures to companies with positive environmental, social and governance (ESG) factors, while providing investment results that correspond to the total return of the broad-based international equity ESG index, the MSCI ACWI ex USA ESG. This Pool invests in the Fidelity International Sustainability Index Fund.
• The Environmental Impact Access Pool, which is a fossil fuel-free strategy that invests in companies around the world that are developing innovative solutions to resource challenges across energy, water, waste, and sustainable food & agriculture markets. This Pool invests in the Pax Global Environmental Markets Fund.

Each of these pools provides Fidelity Charitable donors available opportunities to align their investments with their broad philanthropic goals or, in the case of the environmental pool, support a specific thematic interest. As impact investing continues to evolve, Fidelity Charitable will continue to evaluate our investment pools line-up to better serve those donors interested in this space. The broadening of our Sustainable and Impact Investing pools line-up represents an exciting time and one where Fidelity Charitable is able to offer robust solutions for donors to establish an asset allocation in their Giving Account that is consistent with their charitable goals.

¹Global Sustainable Investment Alliance

²Morningstar

³The Morgan Stanley Institute for Sustainable Investing