Fidelity testing ESG fintech Matter for upping its impact

Fidelity International’s Singapore business has completed a proof of concept with a European fintech to integrate its impact reporting.

The firm discovered Copenhagen-based Matter through the Investment Management Association of Singapore, which operates an annual digital acceleration program.

Fidelity conducted its PoC within the IMAS program, and is now rolling it out to Singapore-based distribution clients, notably private banks.

Integrating ESG

The move comes at a confluence of trends: Asia Pacific ESG funds experienced a 50 percent increase in fund flows in Q12021, COVID-19 continues to increase the need for digital transformation, and the Monetary Authority of Singapore is promoting sustainable investing.

Helping portfolio managers and clients make sense of ESG factors, however, remains challenging. Firms still rely on sending clients fund fact sheets, but these fail to capture the complexity of ESG factors. 

“You have to be an expert on carbon-emissions data to make any sense of it,” said Adin Tan, senior manager, private-bank distribution for Asia ex-Japan at Fidelity International (featured image).

Another way is therefore required to make ESG-related data and outcomes more tangible. Fidelity is using Matter’s impact reporting, an API integration that imports Matter’s environmental and social metrics to its own dashboards and client reports.

“We want to show clients the effectiveness of their portfolio for ESG,” said John Fahey, program manager at Fidelity.

Broadening use cases

If clients like the service, Fidelity will explore other ways to do more with the fintech’s data, either by extending the service to other markets or extending capabilities within the firm. 

This could include things like helping portfolio managers use Matter’s tools to help with making investment decisions, or creating value-adding services for clients.

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Tan says a major goal of using Matter is to increase engagement with clients and PMs, which should lead to better client experience and performance. Fidelity is a bottom-up active manager. Its family of sustainability funds comprise a minimum of 70 percent of companies that rate highly on ESG scores, and 30 percent that Fidelity believes can improve their ratings.

In a traditional fund, a portfolio manager looks for companies she believes are undervalued by the market. In this context, Fidelity is looking to add alpha by investing in companies that it believes can improve their ESG status.

Matter’s data visualizations therefore can help PMs better understand the ESG characteristics of companies in their portfolio, and then allocate capital to the right ones to achieve a more sustainable outcome. Fidelity is not yet using Matter’s data this way, but they are working together on possible solutions, says Tan.

Fidelity International Limited manages $611 billion as of December 2020 and operates worldwide outside of the United States and Canada; those two markets are the preserve of FIL’s parent Fidelity Investments.

Matter automates reports so investors know what impact their money is having in sustainable portfolios. It creates visualizations to make it easy to see an investment’s ability to mitigate fossil fuel emissions, support waste reduction and renewable energy, or improve labor management.

Fidelity has its own framework for categorizing ESG criteria, while both it and Matter have their own data streams, including from third-party sources. The data gets integrated into Fidelity’s reporting systems and rendered in a dashboard style.