Jenn hui tan
Global Head of Stewardship and Sustainable Investing, Fidelity International
It is becoming increasingly clear that simply reshaping capital flows towards more sustainable businesses will not be enough to solve the pressing environmental and social issues we face. What will make the difference is a fundamental change in the behavior of the company, made possible by significant stewardship. For this reason, we place active engagement at the heart of our approach to sustainable investing.
Improve investor results
Recent history shows that sustainability has an impact on market returns. Our own research found that well-rated environmental, social, and governance (ESG) companies outperformed in the stock market crash of 2020. Our results support the hypothesis that a company’s focus on sustainability is fundamentally revealing of its resilience.
We expect this correlation between market performance and sustainability to strengthen in the future.
Our results support the hypothesis that a company’s focus on sustainability is indicative of its resilience
For companies and industries that are not on our principled exclusion list, we strongly prefer engagement over exclusion. We believe we can create more positive change by leveraging our size and breadth and exercising our property rights.
In 2020, we carried out 923 ESG engagements with 716 companies, including 152 meetings with chairmen and non-executive directors. Key topics included executive compensation, governance and climate change. We have also voted at more than 3,800 shareholder meetings around the world, against management in about 28% of those meetings. *
Our areas of intervention
Our engagement efforts focus on three key themes of sustainable investing:
- Understanding the risks associated with nature in the fight against climate change
- Caring for employees, supply chains and communities
- Redefining ethics for a digital world
Through active engagement, we are playing our part in phasing out funding for coal-fired power plants. In 2018, we initiated a thematic engagement with banks on their financing of such factories in Asia. Initially, we focused on Singaporean banks, but we have since extended our engagement to banks in Japan and China.
We have also worked with a leading logistics company, ZTO Express, to improve its sustainability benchmarks. Our fruitful dialogue has helped integrate more sustainable practices into its day-to-day operations: improved disclosures, shift to biodegradable packaging and shift to a carbon-efficient logistics fleet.
Recent history shows that sustainability has an impact on market returns
When it comes to employee well-being issues and improving the sustainability of supply chains, we pressure companies to take greater responsibility, not just for well-being. of their employees but for that of the community as a whole and of individuals in their complex supply chains.
We are also working hard to raise our own sustainability standards. Fidelity has a stated goal of being net zero as a business by 2030. We firmly believe in living by the standards we set.
Our long-term commitment to raising our own ESG standards also gives us more credibility when we ask issuers to do the same.
* Source: Fidelity International, July 2021
For investment professionals only. Capital at risk. The opinions expressed may no longer be relevant and implemented. Exchange rates can affect investments in foreign markets. Investments in emerging markets can be more volatile than in developed markets. The state of a security’s ESG credentials can change over time. Reference to specific securities should not be construed as a recommendation to buy or sell such securities – it is included for illustration purposes only. Issued by Financial Administration Services Limited and FIL Pensions Management, authorized and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and the F symbol are trademarks of FIL Limited. UKM0821 / 36574 / SSO / NA