As 2024 begins, Fidelity International (‘Fidelity’) reinforces its commitment to sustainable investing by focusing its approach around four systemic themes where there are opportunities to contribute to the health and preservation of global economic and social systems, in line with the firm’s strategy to deliver better long-term financial futures to its clients.
Fidelity’s four systemic themes of nature loss, climate change, strong and effective governance, and social disparities will help drive the firm’s engagement approach to influence positive change. This approach to sustainability builds on the progress made by Fidelity over the years comprising integrating ESG across its investment portfolio, developing a robust ESG methodology framework and actively contributing to key regulatory frameworks both at a global and local level.
1. Nature loss
As a Finance for Biodiversity pledge signatory and foundation member, Fidelity has committed to protecting and restoring nature through its financing activities and investments. In line with its fiduciary duty, Fidelity intends to act where it sees opportunities to mitigate natural capital decline and contribute positively to the health and preservation of critical systems.
In 2023, Fidelity reinforced its commitment to nature with the launch of its Nature Roadmap1 where nature and deforestation are highlighted as priorities for the firm, in addition to the integration of biodiversity criteria into its ESG frameworks and the support of an innovative bioacoustics project aimed at developing a measurement tool using advanced technology.
In 2024, Fidelity will continue to address these issues namely through its engagement activities, and in particular will vote against companies in high-risk sectors that do not meet its minimum standards of deforestation-related practices and disclosure.
2. Climate change
In line with Fidelity’s ambition to achieve net zero across its investment portfolios by 2050, including halving its portfolios carbon footprint by 2030, and to phase out investment in thermal coal by 2030 in OECD countries and in the rest of the world by 20402, Fidelity continues to reinforce its approach to addressing climate. As more businesses publish credible transition plans, Fidelity will be championing further developments in transition finance, including innovation in sustainable debt instruments. It will also seek regulatory engagement opportunities that encourage governments to close policy gaps to make green technologies cheaper, and regulators working to channel transition financing to the right places.
3. Social disparities
As the collective effort to decarbonise continues to accelerate, one of the unintended consequences could be increased social disparities. Allowing such inequities to persist will likely impede climate action and potentially negatively impact individual companies’ prospects, and investors’ portfolios overall.
In 2023, Fidelity contributed to raising awareness of the topic of social disparities through its research on Just Transition3, which highlighted that only 42% of investors interviewed are familiar with the concept of a ‘just transition’, of which only 35% have or are developing a dedicated investment strategy focused on a ‘just transition’. While investors are starting to understand the importance of this concept, the survey indicates the urgency to continue to raise awareness as the societal impact of transitioning to a sustainable economy has to be a central consideration. In 2024, Fidelity aims to pursue its efforts to help decarbonise the economy, while supporting the social transitions in the communities that need it the most through active stewardship, particularly in our thermal coal engagement programme.
4. Strong and effective governance
Fidelity views effective governance, at multilateral, national, industry and corporate levels, as a precondition of effective action on sustainability. Engagement and voting are inter-connected disciplines and AGMs represent a critical moment for companies where votes can have significant implications. Where companies’ actions and efforts are deemed inadequate, Fidelity will intensify its dialogue and express its position through voting and shareholder resolutions, continuing to focus on issues such as board effectiveness, corporate culture and behaviour, remuneration and shareholders’ rights and transparency.
Jenn-Hui Tan, Chief Sustainability Officer, Fidelity International comments: “At Fidelity, we have long been committed to sustainable investing, and continuously aim to reinforce our approach as the sustainability landscape evolves.
“In line with our ambition to address sustainability-related challenges and to continue to generate strong financial outcomes for our clients, we have focused on the themes of nature loss, climate change, governance, and social disparities as these present the most significant systemic risks for our economic and social systems. Failing to address these issues or looking at each issue in isolation will prevent us from collectively transitioning to a sustainable economy and will negatively impact portfolios.
“In 2024, Fidelity will strive to amplify its active ownership approach as a positive force for driving sustainable business practices in the companies we invest in. In parallel we will continue to contribute actively to the development of key regulations such as SFDR and the implementation of regulation coming into force this year such as CSRD, which we think will be essential for encouraging and harmonising sustainable investing across the industry.”
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