Article 9, also known as “products targeting sustainable investments”, covers products targeting bespoke sustainable investments.
Fidelity International has expanded its fund range to include six funds classified as Article 9 under the European Sustainable Finance Disclosure Regulation (SFDR).
These funds, which are registered with the Monetary Authority of Singapore (MAS) as recognised schemes for public offering, address growing client demand for investment strategies that contribute to and benefit from the transition to a more sustainable economy, says Fidelity in a Sept 6 statement.
Jenn-Hui Tan, chief sustainability officer, Fidelity International, says these funds are supported by the further enhancement of Fidelity’s sustainable investing framework, including a proprietary dataset which assesses an issuer’s positive contribution to the targets and indicators of the United Nations Sustainable Development Goals (SDG). “From this foundation, we have been able to develop a series of fund solutions for clients wishing to align their investments with the transition to a sustainable economy.”
Fidelity‘s Sustainable Family range of funds is a cross-asset class fund range with a focused environmental, social and governance (ESG) framework.
Its investment approach is underpinned by three pillars centred around engagement, exclusion and Fidelity's proprietary research.
Fidelity has launched two new active Article 9 funds that aim to achieve capital growth over the long term by investing in “sustainable investments” through investments in their respective global or regional remits.
These are the Fidelity Funds — Sustainable Global Equity Fund and Fidelity Funds — Sustainable Asian Focus Fund.
In addition, four of Fidelity’s Sustainable Family range of funds have been reclassified from SFDR Article 8 to Article 9.
According to Fidelity, these strategies have been adapted to fit with Fidelity’s Article 9 framework but the portfolio management team for these reclassified funds remains unchanged.
These are the Fidelity Funds — Sustainable Biodiversity Fund, Fidelity Funds — Sustainable Climate Solutions Fund, Fidelity Funds — Sustainable Eurozone Equity Fund and Fidelity Funds — Sustainable US Equity Fund.
Article 6, 8 and 9 funds are the three classifications that are applied to all investment products sold within the EU under the EU’s SFDR, effective from 2022.
Article 9, also known as “products targeting sustainable investments”, covers products targeting bespoke sustainable investments and applies “where a financial product has sustainable investment as its objective and an index has been designated as a reference benchmark”.
Article 9 requires 100% of fund investments, net of cash and hedging instruments, to be invested in “sustainable investments”.
For an issuer to meet Fidelity’s “sustainable investment” definition, it must have at least 50% of its revenues generated from activities contributing to an environmental or social objective, measured by the EU Taxonomy.
In addition, as specified by SFDR, “sustainable investments” are required to do no significant harm and meet minimum safeguards and have good governance practices.
Johann Santer, head of private banking and regional lead for wholesale and wealth, Fidelity International, says sustainability is one of the biggest and “most positively disruptive megatrends” in our industry. “As regulations across the region continue to grow and align, and as client demand increases, we are committed to delivering sustainable solutions to clients that have clear objectives and targeted outcomes.”
Fidelity is one of the world’s largest asset managers, with $744.8 billion in total assets and more than 2.8 million customers globally.
Amid fears of greenwashing accusations, asset managers like BlackRock and Amundi reclassified their Article 9 funds to the less-stringent Article 8 in late 2022, wiping off EUR175 billion ($255.84 billion) in funds.
Article 8, also known as “environmental and socially promoting”, applies “where a financial product promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices”.
Passive funds that went from Article 9 to Article 8 because they tracked Paris-aligned benchmarks and climate-transition benchmarks now may have to be reclassified as Article 9.
In an April 14 guidance, the EU Commission said SFDR is “neutral” when it comes to financial product design, and that investments “that have an objective of reduction in carbon emissions can therefore fall within the scope” of Article 9. That applies “whether they use a passive or active investment strategy,” it said.