Defining Sustainable Fixed Income ETFs

Sustainable investing integrates environmental, social, and governance (ESG) factors into investment research and decision-making. These ETFs aim to incorporate ESG factors into their investment selection process for fixed income securities.

Sustainable fixed income ETFs can provide exposure to debt instruments that contribute to positive societal and environmental outcomes. They combine this with still seeking to achieve their investment objectives. This approach recognizes that ESG factors may have a material impact on the long-term financial performance and risk profiles of bond issuers.

Advisors can use the Fidelity Sustainable Core Plus Bond ETF (FSBD ), the Fidelity Sustainable High Yield ETF (FSYD ), and the Fidelity Sustainable Low Duration Bond ETF (FSLD ) to provide clients with choices that align their fixed income allocations with sustainability considerations. This approach potentially focuses on bonds issued by entities with strong ESG profiles or those financing environmentally or socially beneficial projects.

The ETFs use Fidelity’s proprietary ESG ratings framework in addition to third-party ESG ratings to evaluate a company’s or issuer’s sustainable business practices.

FSBD seeks a high level of current income. The fund is actively managed. It invests in debt securities of all types believed to have positive ESG benefits and repurchase agreements for those securities. The ETF’s 30-day SEC yield is 4.97% as of May 20.

FSYD also seeks a high level of income but may also seek capital appreciation. The active ETF invests in debt securities rated below investment grade (also referred to as high yield debt securities or junk bonds) of companies believed to have proven or improving sustainability practices based on an evaluation of such companies’ individual ESG profile. FSYD’s 30-day SEC yield is 7.42% as of May 20.

Finally, FSLD seeks to obtain a high level of current income consistent with preservation of capital. The fund is also actively managed, investing in investment-grade debt securities (those of medium and high quality) of all types that are believed to have positive ESG benefits and repurchase agreements for those securities. The 30-day SEC yield is 4.40% as of May 20.

For more news, information, and analysis, visit the ETF Investing Channel.

Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.

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