A report released Wednesday by two corporate accountability groups, Little Sis and the Action Center for Race and the Economy, aims to shine a spotlight on ties between leadership at Fidelity Investments and the fossil fuel industry.

With $4.2 trillion under management, Fidelity Investments is one of the largest asset management firms in the world, and the third-largest in the United States after Blackrock and Vanguard. It is perhaps best known for managing the retirement accounts of millions of Americans. But as activists have increasingly drawn attention to Blackrock’s and Vanguard’s track records on climate change, Fidelity has not received the same scrutiny.

That’s in part because Fidelity is a bit of an anomaly among large asset managers. Whereas Blackrock is a publicly traded company with shareholders to respond to, and Vanguard is owned by its clients, Fidelity Investments is a family business. It is privately held by the somewhat secretive, billionaire Johnson family, including Abigail Johnson, the company’s 60-year-old president and CEO.

The precise breakdown of Fidelity Investments’ ownership structure is elusive. But according to SEC filings, members of the Johnson family are the predominant owners of FMR LLC, Fidelity’s parent company, with a 49 percent stake. Bloomberg has previously reported that Abigail Johnson alone owns 24.5 percent of the company.

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The new report highlights two facets of Fidelity’s ties to fossil fuels. First, in addition to owning Fidelity, the Johnson family also owns Discovery Natural Resources, an oil and gas company that operates in the Permian Basin in Texas. This connection has previously been reported in passing by Bloomberg and Forbes. But the report authors find documents that suggest that other Fidelity executives could also be actively involved in managing Discovery. 

For example, a court filing related to a complaint against Discovery from early 2022 notes that a company called Horizon Natural Resources Investors has a significant stake in Discovery. Horizon Natural Resources is registered in the state of Massachusetts, and state business records list an entity called Star Horizon Management LLC as its manager. The managers of Star Horizon include Abigail Johnson and her brother Edward Johnson, as well as current and recent Fidelity executives Lane MacDonald, Gerard McGraw, and John Remondi. An Environmental Protection Agency filing from 2020 also lists FMR LLC as the “parent company” of Discovery.

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Second, the report notes that 15 out of the 19 independent trustees who oversee two large umbrellas of funds at Fidelity, together worth more than $2 trillion, either currently or previously held CEO or director positions at fossil fuel-related companies. (In addition to oil and gas companies, the authors include positions at certain utilities, banks, an airline, a pipeline company, an oilfield service company, a rail transport company, a corporate lobbying group, and a U.S. military maintenance contractor in their count.) In many cases the trustees also own shares in those companies worth hundreds of thousands to millions of dollars.

“The heights of power at Fidelity, whether it’s the family that owns the firm, or the trustees who govern and oversee trillions of Fidelity funds, are deeply intertwined with and personally profiting from fossil fuel operations,” said Derek Seidman, one of the authors of the report. “I think it means that Fidelity is massively conflicted when it comes to overseeing climate progress.”

But unlike Blackrock, where CEO Larry Fink has issued annual letters touting the company’s new climate-minded direction, Fidelity Investments has not indicated that addressing climate change is a priority for the firm. 

It has worked on reducing emissions from its operations, offers clients sustainable investing options, and claims to integrate ESG, or environmental, social, and governance considerations, across its products, services, and investment decisions. 

But the company has not joined Climate Action 100+, a prominent investor-led initiative that engages with major greenhouse gas emitters to take action on climate change. It also has not joined the Net-Zero Asset Managers Initiative, a global coalition of asset managers that are committed to supporting the goal of net-zero emissions by 2050. (Fidelity International, an independent company that spun off from Fidelity in 1980 but is still owned in part by the Johnson family, is a member of those two groups.) Fidelity Investments did not respond to a question about why it has not joined these groups.

In 2017, the company endorsed the Task Force on Climate-Related Financial Disclosures, or TCFD, an organization formed to develop standards for climate-related risk disclosures. However, it has yet to follow the task force’s recommendations. The firm’s 2021 Environmental Report states, “We intend to begin to report in alignment with the recommendations of the TCFD in the near future.”

“I think this report begins to offer some reasons why Fidelity’s structure is not lending itself to climate leadership,” said Casey Harrell, a senior strategist at The Sunrise Project, a climate advocacy organization that focuses on the financial sector. Harrell provided the authors feedback on an earlier draft of the report. 

Other observers did not find Fidelity’s fossil fuel ties to be particularly surprising or concerning. “I think these are points worth investigating, but far from proof of any sort of conflict of interest,” said Witold Jerzy Henisz, a University of Pennsylvania management professor who directs the business school’s ESG analytics lab. It would be an “awkward omission” if the trustees did not have any oil or gas stocks in their portfolios, he said. “I don’t think these kinds of aspersions are helpful. We have to know a lot more than just the fact that you own shares or that you sit on a board.”

Michael Aalto, vice president of enterprise external communications at Fidelity Investments, said that “while trustees review the investment objectives, policies, and practices of each fund under its oversight, they do not make investment decisions, nor direct what securities Fidelity’s portfolio managers may or may not invest in.” He said the funds’ overall objectives and strategies are determined by investment advisors and then approved by the fund board’s trustees.

Robby Greengold, the lead analyst of Fidelity’s asset management business for Morningstar, an investment analysis firm, said this rang true with his experience. He said that Fidelity’s portfolio managers “have discretion almost entirely to invest as they wish” and that “the trustees have not had any detectable influence on these portfolios.”

Henisz connected the report’s framing to the broader debate in the world of finance over whether to divest from fossil fuel companies to starve them of resources or to maintain investments in the industry in order to engage with those companies and ensure they are taking action to reduce greenhouse gas emissions

By outward appearances, Fidelity does not seem to be using its power to engage. A 2020 analysis by the corporate watchdog group InfluenceMap that rated asset managers’ engagement on climate change gave Fidelity a “D.” It found that Fidelity was not transparent about “the contents and targets of its engagements on climate,” was “not actively trying to change the business models of companies on climate,” and was not “engaging companies on their lobbying activities and influence over climate change legislation.”

Harrell said it was “crucially important” for the company to understand and account for the financial risks of climate change. That includes the physical risks to companies in its portfolio from extreme weather, as well as the risk of them losing value in the transition to a cleaner economy. He’s concerned that when Fidelity leadership is presented with decisions that might be best for transitioning to a low-carbon economy, but may not be best for the short-term interests of their fossil fuel holdings, “the people who will pay the price are Fidelity’s customers.”

Fidelity did not respond to a question about what the company is doing to protect customers’ investments from the financial risks tied to climate change. The company also did not respond to a request for comment on the report’s criticism of the Johnson family’s ownership of Discovery Natural Resources.