Fidelity Investments filed paperwork with the Securities and Exchange Commission on Friday to register a suite of sustainable target-date funds.
Called the Fidelity Sustainable Target Date Funds and the Fidelity Sustainable Target Date Income Fund, the Boston-based company will invest in securities it “believes have proven or improving sustainability practices or positive environmental, social and governance (ESG) characteristics.”
Fidelity said its ESG rating process “evaluates the current state of an issuer’s sustainability practices using a data-driven framework that includes both proprietary and third-party data, and also provides a qualitative, forward-looking assessment of an issuer’s sustainability outlook provided by [Fidelity’s] fundamental research analysts and ESG team.”
Also Friday, Putnam Investments, Fidelity's crosstown rival, anounced that it too has launched the Putnam Sustainable Retirement Funds, a target-date series for the retirement savings marketplace. The suite invests in actively managed sustainable and ESG-focused exchange-traded funds (ETFs) managed by Putnam.
“As the retirement marketplace continues to evolve and grow, there is tremendous appetite for meaningful product innovation that creates greater choice of offerings to help working Americans achieve their financial goals,” Puntnam President and CEO Bob Reynolds said in a statement.
The announcements come at an interesting time for ESG investing products and strategies, which are receiving more scrutiny due to recent Department of Labor rules and the resulting backlash.
The rule, Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, took effect at the end of January. Yet, in the preceding days, a coalition of 24 states filed suit to stop it.
Led by Texas, the coalition claimed the rule “undermines key protections for retirement savings of 152 million workers—approximately two-thirds of the U.S. adult population and totaling $12 trillion in assets—in the name of promoting environmental, social, and governance (‘ESG’) factors in investing, including the Biden Administration’s stated desire to address climate change.”
It’s part of a larger effort from certain sectors to push back on the inclusion of ESG factors in investing, which they feel is ill-defined and potentially damaging to individual investors.
Once popular with large asset managers like BlackRock, many firms have recently curtailed their ESG priorities. In December, Vanguard announced it would leave the Net Zero Asset Managers (NZAM) initiative, a corporate coalition committed to making their investment portfolios emission-neutral by 2050.
However, the ESG strategy remains popular overall, with a 2022 US SIF report putting total U.S. sustainable investment assets at $8.4 trillion.
