The asset manager, which has total client assets of $787.1bn, also committed to phasing out exposure to the thermal coal sector in OECD countries by 2030, and by 2040 globally.
The new climate ratings will use Fidelity’s in-house research capabilities to assess the net-zero ambition and alignment of its investee companies, and will help establish targets for the net zero pathway of its funds.
The ratings will be used in conjunction with the enhanced voting practices that the asset manager revealed earlier this year.
Jenn-Hui Tan, global head of stewardship and sustainable investing at Fidelity International, said: “As a responsible investor, we must understand the carbon footprint of the portfolios we manage for our clients and work with the companies we invest in to reduce emissions in alignment with global net-zero targets.”
Climate ratings will be applied to all companies in Fidelity’s investment universe and integrated into all investment decisions.
The initial phase of this process will use the ratings to identify engagement opportunities in “high-impact” sectors and to set interim targets for 2025 and beyond to ensure that all funds which promote environmental or social characteristics and those with a sustainable investment objective are aligned with a net-zero trajectory by 2050.
Fidelity will enhance its engagement with management in instances where issuers are assessed to be not aligned, but do have a “credible transition pathway”.
“Fidelity invests in many of the world’s leading companies and we want to use our influence as active stewards of capital to help the world meet its climate goals. This long-term, engagement-led policy aims to hold businesses to account for their carbon footprint and ensure that transparent public markets are a powerful force for decarbonisation,” said Tan.
Fidelity called its policy on thermal coal a “gradual exit” in order to give companies time to demonstrate their ability to transition, taking an approach that will also be guided by its climate ratings and engagement policy.
The asset manager has pledged to divest from companies that do not show progress towards net zero in a timeframe not exceeding three years.
Tan said: “Immediately exiting our exposure to more carbon-intensive companies will diminish the impact we can make through active engagement and is unlikely to make a difference to real-world emissions nor will it address the energy needs of many countries today.”
Earlier in the year, the asset manager brought forward its goal to reduce company-wide operational carbon emissions to net zero by 2030.