Fidelity® International Discovery Fund has an average Morningstar Sustainability Rating of 3 globes, indicating that the ESG risk of holdings in its portfolio is similar to that of its peers in the Global Equity Large Cap category. Investors concerned about ESG risk may be better off with funds in the category that receive 4 or 5 globes, as they tend to invest in securities less exposed to ESG risk. ESG risk provides investors with a signal that reflects to what degree their investments are exposed to risks related to material ESG issues, such as climate change and inequalities, that are not sufficiently managed. ESG risk differs from impact, which is about seeking positive environmental and social outcomes.
One key area of strength for Fidelity® International Discovery Fund is its low Morningstar Portfolio Carbon Risk Score of 8.76 and low fossil fuel exposure of 6.39% over the past 12 months, which earns it the Morningstar Low Carbon Designation. The fund is therefore well positioned to transition to a low-carbon economy. The fund exhibits negligible exposure (1.95%) to companies with high or severe controversies. From bribery and corruption to workplace discrimination and environmental incidents, controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. In addition, controversies can damage the reputation of both companies themselves and their shareholders.
One potential issue for a sustainability-focused investor is that Fidelity® International Discovery Fund doesn’t have an ESG-focused mandate. Funds with an ESG-focused mandate would have a higher probability to drive positive ESG outcomes.