At the heart of Fidelity’s sustainable investing is our active engagement and collaborative approach with investee companies to drive positive change across their ESG practices, leveraging our global analyst network.
What engagement means to us
How it looks in practice
Through ongoing dialogue with investee or potential investee companies and voting on resolutions at general meetings, our engagement spans the investment lifecycle.
Explore some of our recent and ongoing activity
Fidelity’s global research network of 293 cross-asset analysts* quiz the managers of investee companies on everything from their business models and financials to human rights policies and the environmental
impact of their supply chain
Our analysts’ insights feed into Fidelity’s global research resource which our portfolio managers use to inform investment decisions, while our proprietary Sustainability Ratings generate a forward-looking assessment of each company’s ESG performance
Ultimately, we do this because we believe that by investing in companies which operate with high standards of corporate responsibility we can help protect and enhance investment returns for our clients
As well as one-to-one engagements, we collaborate with policy makers, industry groups and non-governmental organisations across the globe to improve practices and standards.
Our global analyst network
Analyst insights – ESG trends
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“Engagement is a big part of our toolkit for creating positive change”
“We prefer engagement over exclusion as it often leads more effectively to real-world decarbonisation as opposed to just reducing an investment portfolio’s carbon footprint”
“You achieve the best outcomes not by naming and shaming a management team, but by persuading them that you genuinely know and care about their business and have insights to add”
Our global analyst network
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Benefit from more in-depth case studies about our active engagement globally
Engagements
Supply chains
Energy transition
Engagements
Supply chains
Energy transition
Putting a stop to
coal financing
Explore how we are helping energy transition in other ways
All of these banks have since tightened their coal policies by reducing exceptions previously allowable and by stating that they would not finance new construction of coal power.
Phasing out financing for coal-fired power plants (CFPPs) is crucial. We initiated a thematic engagement with banks on their financing of such plants in Asia, initially focused on Singaporean banks, and since expanded to banks in Japan and China.
We encouraged banks in the region to readdress their CFPP financing projects and improve disclosure. All three leading Singaporean banks committed to cease financing new CFPP in new markets, which was later extended to Japanese banks.
Urgent action around the world is needed to tackle the climate crisis, but with over 100 coal-fired power plants (CFPP) at planning stage in Southeast Asia, the region will not meet climate change targets
Explore how we are improving other aspects of global supply chains
One year on and the number stranded has halved to 200,000.
Our campaign called for urgent action to address this overlooked global humanitarian crisis and preserve the long-term sustainability of global supply chains.
In an open letter to the United Nations, and in consultation with key marine organisations, a consortium of international investors led by Fidelity and representing US$2 trillion of assets under management sought to end this humanitarian crisis.
However, despite these improvements, the issue has not been fully resolved and the threat of new Covid-19 variants could quickly reverse the tide. Seafarers still stuck far from home are often not part of local vaccine programmes and continue to face pandemic-related restrictions.
Each seafarer represents a link in the chain of global trade, and their situation risks potential disruption of the kind we witnessed when the giant cargo ship Ever Given blocked the Suez Canal in March 2021.
A crisis at sea
Last year, as the Covid-19 crisis deepened, there were 400,000 forgotten maritime workers stranded at sea.
Number of stranded one year on
Number of maritime workers stranded at sea in 2020 due to Covid-19 crisis
Value of AUM managed by campaigning consortium
US$2trn
KEY FACTS
400,000
200,000
Luggage
Palm oil
Fashion
Fast food
Fast food
Palm oil
Luggage
Explore other engagements across diverse industries and topics
China logistics
Global sustainable engagement -
Fidelity's engagement with China's ZTO Express delivery company began in 2019. Analyst and portfolio manager Terence Tsai worked with ZTO to improve its ratings with third party agencies which were judging the company without recognising local business differentiation.
That engagement led to ZTO's first English language ESG report – an action that saw others in the highly competitive Chinese logistics industry follow suit – as well as an improved rating with one of the agencies
In this video we hear from Terence about that initial engagement as well as from portfolio manager Lynda Zhou and ESG analyst Jingmin Hu as they visit the company's distribution hub in Shanghai. There they see firsthand the immense scale of ZTO's operations and talk to senior executives about the company's latest efforts to improve its ESG credentials.
How can investors see the reality of ESG profiles around the world in complex industries like logistics?
THE ISSUE
A dressing down for fashion sourcing
Fashion
ENGAGEMENT TYPE
One-to-one
When the opportunity came to engage with a large global luggage producer, we initiated discussions about non-disclosure of human rights in the supply chain and no disclosure on sustainable sourcing.
The outcome was that the supplier increased disclosure in its Sustainability Reporting and updated its supplier ratings system.
OUR ENGAGEMENT & OUTCOME
One-to-one
ENGAGEMENT TYPE
The margins for luggage producers depend on sourcing low-cost materials, but that shouldn’t lead to the risk of modern slavery.
THE ISSUE
Getting a handle on luggage production transparency
In Sri Lanka, we engaged with a garment textile company to discuss non-disclosure of human rights in the supply chain and the adoption of best practices in general.
The supplier agreed to increase disclosure regarding how human rights are assessed in the supply chain and to further transparency in relation to how they monitor the environmental footprint of their suppliers.
We supported the textile company with best-in-class reporting to guide their future disclosure.
OUR ENGAGEMENT & OUTCOME
Around the world, consumers are buying clothes without knowing if these are produced by companies that respect human rights and the environment.
We engaged with a vegetable and palm oil producer to share concerns that several suppliers may have committed human rights violations which would cause the termination of contracts with important global clients.
Following the engagement, the company significantly improved transparency through detailed disclosure on their supply chain management, including the company’s engagement activities with suppliers and traceability, leading to one of the best practices in the industry.
One ESG Rating provider raised the score of the raw material sourcing and described the company as best positioned to manage potential risks in their report.
OUR ENGAGEMENT & OUTCOME
One-to-one
ENGAGEMENT TYPE
It’s vital that the world’s palm oil producers improve the transparency of their supply chains, including human rights concerns – for both sustainability and risk management reasons.
THE ISSUE
Pressure on palm oil producer provides comfort
We are participating in the “Find it, Fix it, Prevent it” initiative on modern slavery. The UK hospitality sector is the first focus area of the campaign, which got under way in late 2020.
As part of this initiative, we are leading the engagement with the UK business of a globally branded fast-food chain regarding their suppliers’ oversight of modern slavery. The company acknowledged that the extent of its suppliers’ due diligence was limited. They have been relying on SEDEX (collaborative platforms for sharing responsible sourcing data on supply chains) and focusing on tier 1 suppliers.
OUR ENGAGEMENT & OUTCOME
One-to-one
ENGAGEMENT TYPE
Companies need to develop and implement better processes for finding, fixing, and preventing modern slavery in their supply chains.
THE ISSUE
Preventing exploitation in supply chains
Despite this limited current visibility, it was encouraging to hear that the company is dedicating more resources to this area with a new team in charge of setting up a supply chain management program.
Car industry
Banking
Insurer
Publisher
A UK publishing company called an extraordinary general meeting (EGM) to seek shareholder approval for amendments to the director remuneration policy to accommodate the incoming CEO’s pay package.
We met with the chairman and incoming CEO and discussed the proposal, and we had a robust internal debate on the matter. Our debate was escalated to Fidelity’s Sustainable Investment Operating Committee for final arbitration because it was felt that our voting decision could have wide-ranging impact.
Ultimately, we concluded that it was important to uphold our principles and oppose the plan on the basis of its poor design. We voted against the remuneration policy amendments and communicated this to the company.
OUR ENGAGEMENT & OUTCOME
One-to-one
ENGAGEMENT TYPE
Around the world, company remuneration polices are under scrutiny and investors may need to act to steer things in the right direction.
THE ISSUE
Publisher’s pay packet prompts voting action
Through focused dialogue with a leading UK insurer, we collaborated to institute a Responsible Investment framework for their investments.
The ongoing dialogue resulted in the insurer adopting a fully integrated responsible investment policy to achieve more sustainable returns. It provided the catalyst for the company’s asset managers to integrate ESG analysis into their decision making and put ESG reporting in place.
OUR ENGAGEMENT & OUTCOME
One-to-one
ENGAGEMENT TYPE
Investing sustainably across whole portfolios can be a complex task, so we are reaching out to insurers and other firms to partner with them to improve approaches.
THE ISSUE
Engagement to insure better returns
In Australia, we voted against the remuneration report of an automotive parts and solutions provider due to its approach to executive bonuses in light of the company’s receipt of wage subsidies during the year, staff redundancies and a capital raise the company had conducted to meet challenges related to Covid-19.
We engaged with the company and acknowledged mitigating factors, e.g. the CEO had taken a 30% pay cut when Covid-19 shutdowns occurred, but eventually helped vote down the report at the AGM.
OUR ENGAGEMENT & OUTCOME
One-to-one
ENGAGEMENT TYPE
Public support and other stakeholder interests need to be considered when companies reward management.
THE ISSUE
Remuneration in light of Covid-19
Car industry
Insurer
Banking
Publisher
Under Australia’s two-strike rule, the company will be required to hold a ‘spill resolution’ on potentially removing board members if the remuneration report receives more than
25% votes against at next year’s AGM.
In 2019, one of India's largest retail banks contacted our investment team for guidance on their ESG reporting. Through active engagement and open dialogue, we worked together to enhance the bank’s reporting and practice, with the company welcoming the feedback.
We have offered ongoing guidance and the bank has confirmed it will look to align its reporting to the Task Force on Climate-Related Financial Disclosures (TCFD) guidelines.
OUR ENGAGEMENT & OUTCOME
One-to-one
ENGAGEMENT TYPE
Asia’s companies need help and partnership to catch up with best-practice ESG approaches, especially in complex areas such as financial services.
THE ISSUE
Banking on sustainability best practice
Major bank
Oil and gas
Major bank
Oil and gas
With Climate Action 100+, an investor-led initiative to drive corporates to tackle climate change, we engaged with two large integrated oil and gas companies to advance their climate disclosure and action plans.
Positive outcomes so far include one of the companies investing in green hydrogen production (most of China’s hydrogen is presently carbon-intensive grey or brown hydrogen), disclosing scope 1 and 2 emissions for the first time in its 2019 ESG report, and committing to increasing capital expenditure around clean energy by 2050. They publicly stated a net 2050 target and announced plans to invest in geothermal, wind, solar and pilot hydrogen projects.
This is the first public statement close to a carbon neutral pledge made by a major China state-owned enterprise (SOE).
OUR ENGAGEMENT & OUTCOME
One-to-one
ENGAGEMENT TYPE
China aims to achieve carbon neutrality by 2060 and hit peak carbon emissions before 2030 – but its energy companies need action plans to align with those pledges.
THE ISSUE
Collaboration on the road to China’s net zero goal
Our discussions with a major bank focused on its efforts to reduce its Scope 3 emissions, particularly considering the bank’s Net Zero target by 2050, made public in February 2021, which includes aligning its power generation portfolio to the Paris Agreement by 2030 and no longer providing financial services to power generation clients with more than 10% of revenues dependent on thermal coal – while eliminating all exposure to thermal coal mining worldwide.
We voiced concerns regarding the adverse impact this may have in emerging markets and whether counterparties would simply access capital through alternative sources. However, the group was able to demonstrate that its approach is founded on engagement and offering alternative business strategies.
In comparison to its peer group, the bank is advanced in the consideration of Scope 3 emissions in its strategy.
OUR ENGAGEMENT & OUTCOME
One-to-one
ENGAGEMENT TYPE
Stopping the flow of finance to thermal coal is a priority but investors need to scrutinize initiatives.
THE ISSUE
Halting the financing of climate change – in the right way
One-to-one
ENGAGEMENT TYPE
View more of our recent activity
Collaborative
ENGAGEMENT TYPE
WATCH OUR VIDEO ON THE FIGHT AGAINST COAL FINANCING
Collaborative
ENGAGEMENT TYPE
CLICK ICONS FOR DETAILS
Jenn-Hui Tan, Global Head of Sustainable Investing & Stewardship
*Fidelity, as at 30 June 2021.
Collaborative engagement, where we work with policy makers and industry groups to bring about positive change, is likely to be a rising force
TREND SPOTTING
Global
Europe
China
Asia Pacific (ex China)
Analysts answering: 'Yes in a majority of companies'
2017
2018
2019
2020
2021
…increasing year by year until…
Yes in a majority of companies
Yes in a minority of companies
No not really
Proportion of analysts
41%
5%
54%
2021
...by 2021, most analysts (54%) reported this trend
47%
7%
46%
2020
39%
31%
31%
2019
29%
41%
30%
2018
29%
58%
13%
2017
In 2017, only 13% of analysts saw a growing emphasis on ESG in a majority of companies...
Data gathered from asking 'Have you seen a growing emphasis among your companies to implement and communicate ESG policies in the last year?' Source: Fidelity Analyst Survey 2021
...while the focus on ESG continues to rise everywhere
At the heart of our sustainable investing is active engagement and a collaborative approach…
Analyst insights – ESG trends
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demands real
A sustainable future
Explore our recent case studies
engagement
16%
“But less than a fifth of analysts say collaborative engagements are common”
“Over a third of analysts globally say collaborative engagement is always or usually more effective versus one-to-one engagement”
37%
Engagements
Supply chains
Energy transition
One-to-one
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One-to-one
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One-to-one
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One-to-one
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One-to-one
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One-to-one
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One-to-one
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One-to-one
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One-to-one
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ENGAGEMENT TYPE
Insurer
Banking
Publisher
Insurer
Banking
Publisher
Car industry
Fast food
Palm oil
Luggage
Fast food
Palm oil
Fashion
Luggage
Fashion
Oil and gas
Major bank
Major bank
Oil and gas
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