Assessment and outlook for sustainable investment

The past year has seen monumental changes in the way investors approach sustainable investing – with what was once nice to have becoming a must for many. Much of this was catalyzed by the pandemic, which shed light on the relationship between sustainable business practices and economic resilience. At the same time, governments are facing global calls to guide the economic stimulus measures needed for our recovery to ‘build back better’ and seek collaborative solutions to global threats such as climate change and social inequality.

At Fidelity, we continue to expand the ambition of our sustainable investing practices in three key areas: (i) further integration of environmental, social and governance factors into our investment process; (ii) a focus on climate change; and (iii) prioritize the social issues exposed by the pandemic, including inequalities, employee well-being and online inclusion.

ESG integration

Our fundamental research teams provide proprietary ESG analysis and ratings on our investment universe of over 4,000 issuers worldwide, all with the aim of providing our portfolio managers with true assessments of current ESG risks and opportunities. and emerging and ultimately more informed investment decisions. manufacturing. We are further improving our scoring framework until 2021 – for example, to help identify climate risks and achieve our climate ambition of zero emissions net of our investments by 2050, we are introducing a climate alignment score for each company that shows how well their business is aligning or planning to align on a 1.5 degree warming trajectory.

Climate change

We aim to meet our own operational goal of net zero emissions by 2040 and we are working hard to accelerate that goal. We are also providing greater transparency on our approach by using the widely accepted Framework for Climate Related Financial Disclosures (TCFD) and releasing our first ever Corporate Sustainability Report. However, the greatest contribution we can make is to urge our companies we invest in to decarbonise faster and that is exactly what we have been doing over the past year – through direct engagement with some. of the world’s largest issuers and issuers and through collaborative initiatives with global investors. such as ClimateAction 100+. Through this active engagement, we’ve persuaded more banks to end coal financing, highlighted the social costs of climate change, and challenged businesses to preserve our fragile biodiversity. We have also contributed as a founding signatory of the global Net Zero Asset Manager initiative, which aims to support investments that will allow us to reach net zero by 2050 or earlier, and which now has 87 signatories representing 37 Trillion dollars in assets under management.

Finally, we changed our voting policy to set minimum climate standards for issuing companies, including board oversight of climate risks and emission reduction targets. We have started communicating our expectations to boards and management teams and by next year we will be voting against directors of companies that do not meet them. Climate change is a threat to all of us, and we will look to play our part and more in the years to come.

Employee well-being and online inclusion

Other issues have emerged over the past year, including how businesses have responded to Covid-19. Governments have asked us for advice on how best to help businesses financially, and we have engaged with businesses to support their employees and deal with supply chain disruptions. This included leading a collaborative initiative to address a humanitarian crisis at sea linked to the stranding of sailors due to national border restrictions, potentially threatening the global supply chains we all depend on. Along with other Australian investors, we co-founded and now co-chair Investors Against Slavery and Trafficking, a collaborative engagement initiative addressing modern slavery, labor exploitation and human trafficking in supply chains across the country. ‘Asia-Pacific and Australian businesses that depend on these supply chains.

We have also seen workforce inequalities increase due to Covid-19. We have regularly discussed with companies on how to bridge the social divide and improve gender diversity, setting ambitious goals for ourselves, but also for the companies in which we invest. Later in the year, we called on companies to limit executive pay and bonuses if they had received emergency government support for their workforce, using our vote against executive teams as a stick.

With half the world without internet access, concerns about digital security and inclusion increased as working from home became the norm. So we’ve expanded our cybersecurity commitments to include online well-being, information accuracy, and ethical design of AI.

2020 has been a year of global existential threat, and we’ve all had to adapt. But from there emerged an almost universal desire for a more sustainable world. We just need to make it happen.

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