Fidelity launches ESG friendly tool for advisers

Fidelity Investments is hoping to make it easier for advisers to allocate client assets into investments that take environmental, social and governance criteria into account, as ESG investing is expected to surge again in 2021. 

While social, economic and market factors are accelerating investor appetite for a more sustainable approach to investing, some advisers are still struggling to manage ESG investment strategies and initiate conversation with their clients about ESG issues, according to Rick Smyers, managing director at Fidelity Labs. 

In that light, the custodian announced on Tuesday the launch of Fidelity ESG Pro, a technology tool aimed at helping advisers create ESG model portfolios and suggesting ways of engaging clients about ESG investing topics.

[More: Visit ESGClarityUS.com for more ESG investing news]

“Typically, an adviser who wants to allocate client assets into ESG funds has to do their own research, look into the different financial characteristics of each fund and try to assemble a portfolio that looks and acts like their existing one,” Smyers said. “That can take a lot of time and spreadsheet work.” 

With ESG Pro, advisers can get their existing portfolio uploaded into the tool, click a button and get an ESG portfolio that looks and acts like their own, according to Smyers. “If the adviser wants, they can adjust, research, and swap out each fund right in the tool — it’ll immediately reflect the changes made,” he said. 

The tool also saves advisers time from the tedious workload of vetting through all the ESG funds out there because the technology does it for them. ESG Pro also provides a comparison tool of up to four models at one time, enabling advisers to see the differences in both ESG exposures and financial characteristics of their portfolios. Advisers can edit holdings and weights while seeing updates to data in real time. 

Fidelity ESG Pro comparison tool. Image provided by Fidelity.

Advisers can also sort and filter funds based on share class and expense ratio, according to the announcement. 

In terms of client engagement, Fidelity ESG Pro also has a scenario-based client questionnaire that helps advisers get a better understanding of how their clients think about ESG factors and what is important to them. The quiz results generate talking points for advisers on how to best address particular focus areas and emphasize what’s top of mind for their clients.

“ESG issues, sometimes, are explicitly political or religious, and those are topics that some advisers are reluctant to engage in until they know the client very well,” said Smyers. “With the quiz, an adviser can send it out to their client in advance, get the feedback and know what to discuss before the ESG conversation even starts.” 

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Additionally, the tool provides customized ESG reports that illustrate how clients’ ESG portfolios perform on up to 24 ESG characteristics compared with a traditional portfolio, according to the announcement. 

Fidelity ESG Pro is a standalone software tool available for all advisers, not just Fidelity customers, for a monthly subscription price at $199, according to Smyers. 

Increased interest in environmental, social and corporate governance investing has pushed major industry players to expand their rosters of ESG friendly tools for advisers as their clients continue to ask for investment strategies that align with their values. 

Earlier this month, BlackRock Inc. announced a minority investment and integration with fintech startup Clarity AI, an ESG investing data provider. The asset manager plans to integrate Clarity AI’s data into the Aladdin management tool. 

Last Fall, experts from Charles Schwab, Merrill Lynch and Fidelity addressed how advisers can use digital tools to increase investor engagement during a panel at the Finovate Fall Digital event.

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