Hopes are high that progress will be made towards key aims such as securing net zero by mid-century and mobilising finance
to combat climate change* – yet the stakes are even higher.
So how can investors and the financial industry play their part?
"If you want to achieve goals such as decarbonisation, you can't do that entirely by funding exciting new start-ups"
Many scientists believe that climate change is already pushing up the rate of natural disasters*
Discover more
Explore our engagement case studies from around the world
How can we engage with
climate change?
But are investors and the industry putting enough effort into engaging with the world’s largest existing industries, to help them change both their technologies and practices? The challenge here is that if you want to achieve goals such as decarbonisation, you can't do that entirely by funding exciting new start-ups.
The earth’s surface has already warmed by more than one degree centigrade, leading to Arctic sea ice retreat, glacier retreat and boosting the chance of increasingly intense weather events such as this year’s flooding in Germany in July and August’s wildfires in Greece. If we don’t decarbonise our society, it’s now clear what will happen and it's hard to imagine a bigger, more universal, more immediate challenge.
Powering change in coal and farming
Eradicating coal-fired power is one of the most urgent issues, and Fidelity has developed a really successful engagement with ASEAN banks on the financing of new coal-fired power plants. We questioned the business rationale given the stranded asset risk of governments phasing out thermal coal to achieve their net zero ambitions – pointing out how this is likely to happen over a much shorter timeframe than was commonly expected. One key success was that all three leading Singaporean banks committed to cease financing new CFPP in new markets.
Another of the world’s traditional industries, livestock farming, is the biggest source of methane caused by human activity. Cutting methane emissions could bring about quicker reductions in the rate of global warming than targeting CO2, as methane breaks down quickly – but it will take concerted industry action and considerable investment.
Engaging with companies and whole industries to bring about long-term change across climate and other sustainability issues takes resources and often long-term relationships – it can’t all be done by monitoring disclosed data that may be of inconsistent quality.
Fidelity’s advantage here is that we are already known for our hugely extensive process around meeting management teams, with 16,000 company meetings every year across an investment universe of around 4,000 companies, meaning we may meet a company on average four times a year.
We now have an engagement tracker on our research platform to help us monitor our ESG engagement. For each company, we can set an objective and set milestones and then track progress, e.g., through a series of meetings with the company conducted by the ESG analyst, the fundamental analyst, or the portfolio manager.
The importance of Asia
Fidelity’s long-term commitment to investing in Asia could prove especially important in the global push for sustainability. It’s impossible, in our view, to solve a single meaningful ESG issue including climate change without involving, or having the solution originate in, Asia.
But local knowledge is required to understand the forces acting on Asian companies and to encourage real change. For example, if you want to understand ESG in China, you need to understand the role of the state, in public enterprises but also in private companies. You need to understand the social licence of Chinese companies to operate in that market and what that means in terms of regulatory and consumer behaviour.
The financial industry has acknowledged that financial decisions have non-financial consequences, recognised the growing investment risks generated by the need to decarbonise, and rightly trumpeted its investment in ‘sunrise’ industries such as renewable technologies. Our 2021 survey of Fidelity research analysts showed that they think there are now more net zero opportunities for companies than there are risks,* particularly among smaller players who could become the climate giants of the future.
Methane can be a more threatening pollutant than carbon dioxide when it comes to the greenhouse gases behind global warming. Our portfolio managers and analysts here discuss some pioneering new methods to avoid or reduce emissions from livestock,
and how these are appealing to investors focused on sustainability.
Cows, methane and the climate threat
Driving positive change on coal financing
As the most heavily polluting fossil fuel, coal should have no future in the global energy mix. Here Marion O’Donnell, Director, Sustainable Investing explains how Fidelity’s active engagement is playing its part to make this a reality.
Engaging with change
Improving ESG transparency in logistics
The rapid growth in e-commerce has been accelerated by the Covid-19 pandemic, with significant knock-on implications in terms of fuel emissions and packaging waste. Against this backdrop, we have been working with ZTO Express, China's biggest express-delivery company, to chart a route to more sustainable growth in this young and fast-growing industry.
*UN News, Climate and weather related disasters surge five-fold over 50 years, but early warnings save lives – WMO report
*Fidelity ESG Survey 2021
Ways we engage with companies
Company meetings
and formal correspondence
Shareholder
resolutions
Collaborative
engagement
Proxy voting
Public policy
*COP26 goals
At a certain point, you're instead going to have to engage with existing industries and the high carbon-emitters of today, to promote the types of positive sustainability practices we want to see. Engagement is therefore a big part of Fidelity’s toolkit for creating positive change.
After all, more than half of the world already lives in Asia and it is probably already the growth driver of the world. And most of Asia produces goods and services for a global, particularly developed market consumer base.
You also need to go out and speak to individual companies across a great range of industries, from energy to logistics. That means you need to have feet on the ground, in a way that we feel lends itself to Fidelity’s regional Asia footprint and long-term relationships.
Learn more
Decarbonising on time means accelerating technological adoption
Fidelity analysis has concluded that >80% of decarbonisation can be achieved through wide scale adoption of existing decarbonisation solutions. Portfolio managers Velislava Dimitrova and Cornelia Furse here use examples of renewables, green hydrogen and electric vehicles to help define the role of investors, governments, and society in accelerating decarbonisation technology adoption rates.
Learn more
Feet on the ground – forward looking data
Learn more
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LEARN MORE
The path to net zero is a complex one. At Fidelity, we have carefully considered the different ways in which managing climate risks and accelerating the low-carbon transition could be made integral to our investment and stewardship processes. Our Climate Investing Policy sets out the approach we have chosen. We believe it will be effective in mitigating climate-related risks and reducing real-world emissions, working alongside the clients who entrust us with their capital and the companies in which we invest.
Getting to net zero and beyond requires investment today in the low-carbon solutions of tomorrow, but every company will require innovation to decarbonise if it is to survive and grow.
At Fidelity, we believe the biggest impact we can have is through investment and engagement.
Discover more
Explore our engagement case studies from around the world
Engaging with change
The financial industry has acknowledged that financial decisions have non-financial consequences, recognised the growing investment risks generated by the need to decarbonise, and rightly trumpeted its investment in ‘sunrise’ industries such as renewable technologies. Our 2021 survey of Fidelity research analysts showed that they think there are now more net zero opportunities for companies than there are risks,* particularly among smaller players who could become the climate giants of the future.
But are investors and the industry putting enough effort into engaging with the world’s largest existing industries, to help them change both their technologies and practices? The challenge here is that if you want to achieve goals such as decarbonisation, you can't do that entirely by funding exciting new start-ups.
At a certain point, you're instead going to have to engage with existing industries and the high carbon-emitters of today, to promote the types of positive sustainability practices we want to see. Engagement is therefore a big part of Fidelity’s toolkit for creating positive change.
Learn more
*Fidelity ESG Survey 2021
Decarbonising on time means accelerating technological adoption
Fidelity analysis has concluded that >80% of decarbonisation can be achieved through wide scale adoption of existing decarbonisation solutions. Portfolio managers Velislava Dimitrova and Cornelia Furse here use examples of renewables, green hydrogen and electric vehicles to help define the role of investors, governments, and society in accelerating decarbonisation technology adoption rates.
VIEW ARTICLE
HIDE POPUP
The importance of Asia
Learn more
Fidelity’s long-term commitment to investing in Asia could prove especially important in the global push for sustainability. It’s impossible, in our view, to solve a single meaningful ESG issue including climate change without involving, or having the solution originate in, Asia.
After all, more than half of the world already lives in Asia and it is probably already the growth driver of the world. And most of Asia produces goods and services for a global, particularly developed market consumer base.
But local knowledge is required to understand the forces acting on Asian companies and to encourage real change. For example, if you want to understand ESG in China, you need to understand the role of the state, in public enterprises but also in private companies. You need to understand the social licence of Chinese companies to operate in that market and what that means in terms of regulatory and consumer behaviour.
You also need to go out and speak to individual companies across a great range of industries, from energy to logistics. That means you need to have feet on the ground, in a way that we feel lends itself to Fidelity’s regional Asia footprint and long-term relationships.
The rapid growth in e-commerce has been accelerated by the Covid-19 pandemic, with significant knock-on implications in terms of fuel emissions and packaging waste. Against this backdrop, we have been working with ZTO Express, China's biggest express-delivery company, to chart a route to more sustainable growth in this young and fast-growing industry.
Improving ESG transparency in logistics
VIEW ARTICLE
HIDE POPUP
Many scientists believe that climate change is already pushing up the rate of natural disasters*
*UN News, Climate and weather related disasters surge five-fold over 50 years, but early warnings save lives – WMO report
So how can investors and the financial industry play their part?
Jenn-Hui Tan,
Global Head of Stewardship and Sustainable Investing
The earth’s surface has already warmed by more than one degree centigrade, leading to Arctic sea ice retreat, glacier retreat and boosting the chance of increasingly intense weather events such as this year’s flooding in Germany in July and August’s wildfires in Greece. If we don’t decarbonise our society, it’s now clear what will happen and it's hard to imagine a bigger, more universal, more immediate challenge.
The path to net zero is a complex one. At Fidelity, we have carefully considered the different ways in which managing climate risks and accelerating the low-carbon transition could be made integral to our investment and stewardship processes. Our Climate Investing Policy sets out the approach we have chosen. We believe it will be effective in mitigating climate-related risks and reducing real-world emissions, working alongside the clients who entrust us with their capital and the companies in which we invest.
*COP26 goals
Hopes are high that progress will be made towards key aims such as securing net zero by mid-century and mobilising finance to combat climate change* – yet the stakes are even higher.
climate change?
How can we engage with
Getting to net zero and beyond requires investment today in the low-carbon solutions of tomorrow, but every company will require innovation to decarbonise if it is to survive and grow.
At Fidelity, we believe the biggest impact we can have is through investment and engagement.
Powering change in coal and farming
Eradicating coal-fired power is one of the most urgent issues, and Fidelity has developed a really successful engagement with ASEAN banks on the financing of new coal-fired power plants. We questioned the business rationale given the stranded asset risk of governments phasing out thermal coal to achieve their net zero ambitions – pointing out how this is likely to happen over a much shorter timeframe than was commonly expected. One key success was that all three leading Singaporean banks committed to cease financing new CFPP in new markets.
Another of the world’s traditional industries, livestock farming, is the biggest source of methane caused by human activity. Cutting methane emissions could bring about quicker reductions in the rate of global warming than targeting CO2, as methane breaks down quickly – but it will take concerted industry action and considerable investment.
Public policy
Proxy voting
Collaborative
engagement
Shareholder
resolutions
Company meetings
and formal correspondence
Feet on the ground – forward looking data
Engaging with companies and whole industries to bring about long-term change across climate and other sustainability issues takes resources and often long-term relationships – it can’t all be done by monitoring disclosed data that may be of inconsistent quality.
Fidelity’s advantage here is that we are already known for our hugely extensive process around meeting management teams, with 16,000 company meetings every year across an investment universe of around 4,000 companies, meaning we may meet a company on average four times a year.
We now have an engagement tracker on our research platform to help us monitor our ESG engagement. For each company, we can set an objective and set milestones and then track progress, e.g., through a series of meetings with the company conducted by the ESG analyst, the fundamental analyst, or the portfolio manager.
Ways we engage with companies
HIDE POPUP
Learn more
Methane can be a more threatening pollutant than carbon dioxide when it comes to the greenhouse gases behind global warming. Our portfolio managers and analysts here discuss some pioneering new methods to avoid or reduce emissions from livestock, and how these are appealing to investors focused on sustainability.
Cows, methane and the climate threat
VIEW ARTICLE
HIDE POPUP
2 / 2
As the most heavily polluting fossil fuel, coal should have no future in the global energy mix. Here Marion O’Donnell, Director, Sustainable Investing explains how Fidelity’s active engagement is playing its part to make this a reality.
Driving positive change on coal financing
VIEW ARTICLE
1 / 2
HIDE POPUP
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COP26 is setting out the scale of the challenge faced by the world and raising the pace of efforts to build a more sustainable future.
Jenn-Hui Tan,
Global Head of Stewardship and Sustainable Investing
COP26 is setting out the scale of the challenge faced by the world and raising the pace of efforts to build a more sustainable future.
"Cutting methane emissions could bring about quicker reductions in the rate of global warming than targeting CO2"
"Eradicating coal-fired power is one of the most urgent issues"
"If you want to achieve goals such as decarbonisation, you can't do that entirely by funding exciting new start-ups"
"Cutting methane emissions could bring about quicker reductions in the rate of global warming than targeting CO2"
