Fidelity Investments is one of the biggest asset managers in the world. By many accounts, it ranks third behind BlackRock and Vanguard in terms of total assets under management. While we often see references to the “Big 3” asset managers – BlackRock, Vanguard, and State Street – the truth is that Fidelity has arguably displaced State Street as the third member of that trio.
Fidelity is based in Boston, Massachusetts and manages $4.48 trillion in discretionary assets as of December 2021. It is privately-owned by the Johnson family, the seventh-richest family in the U.S. The Johnsons are worth $36 billion, according to Forbes, and they are a powerful force in Boston-area politics.
Like other asset managers, Fidelity has made gestures around climate issues, but shareholders and stakeholders remain skeptical of the firm’s climate commitments. In January 2021, Bloomberg, citing a new study by the think-tank InfluenceMap, reported that Fidelity “ranked the worst of the world’s 10 biggest asset managers last year on pushing high-carbon emitters to curb their role in global warming,” receiving a “D” mark. Majority Action, a non-profit shareholder group for corporate accountability, noted in its 2020 “Climate in the Boardroom” report that, of the top twelve asset managers Majority Action reviewed, Fidelity demonstrated the third-lowest level of support (after BlackRock and Vanguard) for the 36 “climate critical shareholder resolutions” it surveyed, “voting for them less than 20% of the time.” Fidelity’s dismal climate governance record continued into 2021, where it held the “ignominious distinction” of supporting 100% of management-backed directors across S&P 500 oil and gas companies, utilities, and major banks, according to Majority Action.
Moreover, while Fidelity puts out various gestures toward “engaging with investors about diversity and inclusion” and “investing for social good,” including around what they frame as “social issues, like racial justice or economic inequality,” the firm’s commanding heights of power are closely tied to, and profiting from, fossil fuel operations that have had documented harmful impacts on Black, Indigenous, and people of color (BIPOC) communities.
Fidelity’s lagging on climate and environmental justice issues comes as less of a surprise given its extremely close – but largely unscrutinized – ties to the fossil fuel industry, specifically at the heights of the firm’s ownership and governance. This report finds that:
- The Johnson family is the hands-on owner of Discovery Natural Resources, a private oil company with major operations in the Permian Basin. The Johnson family owns an oil and gas drilling company, Discovery Natural Resources (DNR), with extensive operations in the Texas portion of the Permian Basin, the busiest oilfield in the U.S. During 2020, DNR was among the top 1% of oil producers and the top 3% of natural gas producers in Texas. The company’s operations have leaked methane, and DNR has spewed emissions equivalent to burning 1.2 billion pounds of coal – or, the equivalent of driving 2.7 billion miles in an average gasoline powered passenger vehicle – since 2011, according to EPA data. Far from being detached investors, the Johnsons have been hands-on owners of Discovery. Johnson family members, and Fidelity executives close to the family, hold roles as directors, managers and officers of Discovery that are documented across various state and federal filings.
- Fidelity trustees who oversee trillions in assets have extensive ties to the fossil fuel industry. Two sets of Fidelity funds each have their own Board of Trustees that together govern hundreds of individual Fidelity funds made up of trillions in assets. There are 19 independent trustees between these two boards, and at least 15 of them – a full 79% – have close current and past ties to fossil fuel companies, fossil fuel industry financiers, and industries dependent on access to fossil fuels, including companies with documented records of pollution and harm.
- Fidelity trustees are tied to numerous fossil fuel operations perpetuating climate and environmental injustice against BIPOC and frontline communities. Fidelity funds’ independent trustees have executive and governing roles with corporate actors whose operations have had harmful, documented impacts on BIPOC and poor communities. From the Permian Basin region to Detroit, Michigan, the commanding heights of Fidelity’s ownership and governance are closely tied to the ongoing pollution of frontline communities.
- A majority of Fidelity trustees surveyed have conflicts of interest because they have a personal stake in fossil fuels. At least 10 of 19 Fidelity trustees the report examines are currently entangled in fossil fuel operations, or have had a stake in them during the past five years, through executive positions or board seats with fossil fuel companies, utilities that rely on fossil fuels, fossil fuel financiers, and companies that do major business with the fossil fuel industry. Most, if not all, of these trustees have personally profited from these fossil fuel ties either currently or recently. Some of these trustees currently hold fossil fuel-tied stock, while others who most certainly do are not required to disclose this information. The report’s findings signify that many Fidelity trustees have financial and governing interests in fossil-fuel-related corporations whose polluting operations conflict with climate and environmental justice. Major financial firms like Fidelity have a responsibility to advance climate justice, which is undermined by these conflicts of interest on their boards.
Fidelity’s close ties to the fossil fuel industry and its harmful impacts on BIPOC and frontline communities are alarming since a core part of the firm’s business is managing the retirement accounts of millions of workers in the U.S. The Johnsons aren’t just profiting off of fossil fuels themselves; they are running a firm awash with fossil fuel investments and conflicts of interests and other ethical conflicts tied to people’s retirement savings, putting those savings at risk. Fidelity’s fossil fuel ties are all the more distressing given the findings of the April 2022 Intergovernmental Panel on Climate Change (IPCC) report that makes clear the need for immediate and drastic reduction of fossil fuel use to avert climate catastrophe.
Because Fidelity is a privately-owned company, and because the Johnsons are notoriously secretive, the firm and its ruling family have been less scrutinized than other major asset managers over their ties to the fossil fuel industry and the ways its fossil fuel profiteering is linked to the extraction of value from and harming of BIPOC and frontline communities. This report seeks to bring more attention to these conflicts.
In sum, with the Johnson family’s direct ownership of a major oil and gas company, and with Fidelity fund trustees’ personally profiting from the fossil fuel industry and holding governing roles with and close ties to the industry, Fidelity faces major conflicts of interest that raise serious concerns over the firm’s ability to make fast, sufficient progress on climate and environmental justice issues.