With ongoing geopolitical tension and recent disruption to supply chains caused by the pandemic, many companies are rethinking accessibility and reliability of supply, which is driving a trend toward reshoring—an effort by U.S. manufacturers to pivot away from production in China and to secure supply chains either close to home or in nations with which America has a better relationship, such as Mexico or India, according to Fidelity’s Nicole Connolly.
“A recent combination of favorable government incentives, a narrowing of the wage gap between China and the U.S., a desire to have greater control over supply chains, and ongoing geopolitical tensions have created the conditions for reshoring to take hold,” says Connolly, chief investment officer for sustainable investing at Fidelity and portfolio manager of Fidelity® Women’s Leadership Fund (FWOMX).
In managing the fund since its inception in 2019, Connolly favors companies that not only advance women’s leadership initiatives and gender diversity, but also have a strong competitive moat that can result in durable earnings growth.
As of August 31, the fund held stakes in companies with exposure to the developing reshoring/onshoring trend, including power products producer Eaton (ETN), industrial powertrain solutions provider Regal Rexnord (RRX), construction materials producer Summit Materials (SUM), steel and metal products manufacturer Commercial Metals (CMC), and electrical products firm nVent Electric (NVT).
These companies benefit from exposure to the reshoring trend and from having a focus on women’s leadership through C-suite and board representation, as well as policies intended to improve gender diversity. For example, Summit and Commercial Metals are both led by women, and nVent has the rare combination of a female CEO and CFO. In terms of having initiatives aimed at greater diversity, Eaton is driving toward its 2030 diversity goals for the company’s board, as well as for senior management and salaried employees.
She notes that the reshoring trend is interesting from a sustainability perspective because of the potential to revitalize communities that were left behind during the globalization era.
“U.S. manufacturing capacity has not grown since 1999, and prior to that it had grown 4% annually for 50 years,” she says. “This leaves a lot of room for growth opportunities and also helps revive these local surrounding economies—elements that play very well in a sustainability-focused fund.”
U.S. reshoring announcements from corporations are up 150% relative to 2019, Connolly notes, and American companies are estimated to have reshored roughly 350,000 jobs in 2022, up from 260,000 in 2021, according to a recent industry report.
“I’m encouraged by these companies’ efforts to locate more of their business in the U.S.,” says Connolly. “I believe it will pay off in both the near and long term for both consumers and investors.”
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Nicole Connolly is chief investment officer of sustainable investing, co-head for equity sustainable investing, and a portfolio manager in the Equity division at Fidelity Investments.
In her role as CIO, Ms. Connolly oversees the evaluation of investment considerations and industry and sector information that shape proprietary environmental, social, and governance (ESG) ratings and provides insights into investable themes across the sustainable landscape. She also helps to direct Fidelity’s sustainable investing product road map focusing on both authenticity and analytical rigor in the development of future funds. Additionally, she manages the Fidelity and Fidelity Advisor Women’s Leadership Funds and the Fidelity Women’s Leadership Fund for Canadian clients. She also serves as co-manager on the Fidelity Women’s Leadership ETF, Fidelity Advisor Women’s Leadership SMA, Fidelity and Fidelity Advisor Sustainable U.S. Equity Funds, and Fidelity Sustainable U.S. Equity ETF.
Prior to assuming her current responsibilities, Ms. Connolly served as managing director of research and managed the Energy, Technology, Utilities, and Emerging Markets teams. Previously, she served as head of Fidelity’s research associate program, which included the management, recruitment, and promotion process for undergraduates hired into Fidelity to cover small to mid cap stocks. Ms. Connolly’s additional areas of management focus included thought leadership around women’s initiatives and incorporating proprietary research into the investment process.
Prior to that, Ms. Connolly was a research analyst for the Small Cap Equity group, where she was responsible for the consumer, healthcare, and energy sectors. Additionally, she worked in Fidelity’s High-Income group and covered the energy, paper, and packaging sectors. Prior to joining Equity and High-Income Research, Ms. Connolly spent two years focused on private equity in Fidelity’s Devonshire Investors group.
Before joining Fidelity in 2000, Ms. Connolly was a financial analyst focused on global project finance while attending the Financial Analyst Investment Banking Training Program at Citibank from 1998 to 2000. Ms. Connolly has been in the investments industry since 1998.
Ms. Connolly earned her bachelor of science degree in finance from Boston College.