Engaging for change

Engaging for change

At Fidelity we focus on engagement in two ways - specialised engagements - those company-specific themes we have identified through our deep bottom up fundamental research, and thematic engagement - key themes we are addressing at an organisational level.  

Specialised engagements are powered by our proprietary ESG ratings system - which captures the ESG rating assigned by our investment team for every company we research and accessible to all our investment team via our global research platform.

These ratings give us a view of how a company is dealing with ESG issues and provides us with the opportunity to take that information and replay it back to the company so that they are aware of where they are lacking relative to their peers, relative to the best in class in their industry, and give them the opportunity to fix that as well.

For every company, we can set an objective for those engagements, we can set milestones against which we'll measure those objectives. Our investment team and ESG analysts record and capture key information on these objectives in their ongoing review meetings and analysis, which enables us to track progress towards those specific objectives.

The second way we engage with companies is part of our thematic approach to engagement. Fidelity doesn't just have deep research, we also have a broad width of holdings around the world.  This gives us the ability to take a certain theme and then go to a sector or a subsector or a value chain and apply that theme in a consistent way.

A current example of our thematic engagements is our approach to climate change.  We want to look at banks and insurance companies and non-bank companies that are engaged in the financing of climate change, either through their lending book or their underwriting book or through their investing book, to see what kinds of risks that they're taking on in those books and whether or not they're really thinking about the climate change risks that are involved.

For emerging markets, much of our work is focused on banks and their financing of coal industries.  Given the very rapid reduction in the cost curve for renewable energy, questions are being asked if banks should be continuing to finance new coal power construction.  In developed markets we are focused on ensuring companies are setting broader net zero carbon emission ambitions and helping them to progress their journey towards a net zero future.

Another example is supply chain sustainability, particularly around the textile and apparel sector primarily within Asia. Looking on one hand at retailers, but also looking at the equipment manufacturers, cotton manufacturers, dye providers and asking questions around two specific topics. One is around human rights, which encompasses, but isn't exclusively about modern slavery within those supply chains. And the second is around their environmental footprint, including water usage, energy usage, waste disposal and treatment and so on.

At Fidelity we have a large ESG team globally dedicated to engagement and the integration of ESG into our investment process. With 17 full-time ESG analysts around the world split across six locations, they sit alongside Portfolio Managers in the same company meetings, asking the same types of questions to management so it’s a fully integrated approach. We believe that continuous and in-depth engagement is the best way to exert a positive influence on corporate behaviour. When we make investment decisions, we think carefully about how we can engage with the companies we own to create better results for a range of stakeholders, including employees and suppliers, and build long-term social and corporate value.  

As we move through the Covid-19 crisis, we expect engagements with companies to take on an even bigger role, both in terms of how we fulfil our social purpose as a fund manager and in terms of helping our clients achieve better financial and social returns from the companies in which they invest.

Learn about Fidelity’s Sustainable Water and Waste Fund. Discover now

This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”).  Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity International.

 

Prior to making an investment decision, retail investors should seek advice from their financial adviser. This document is intended as general information only.

 

This document has been prepared without taking into account your objectives, financial situation or needs.  You should consider these matters before acting on the information.  You should also consider the relevant Product Disclosure Statements (“PDS”) for any Fidelity Australia product mentioned in this document before making any decision about whether to acquire the product. The PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading it from our website at www.fidelity.com.au. This document may include general commentary on market activity, sector trends or other broad-based economic or political conditions that should not be taken as investment advice. Information stated herein about specific securities is subject to change. Any reference to specific securities should not be taken as a recommendation to buy, sell or hold these securities. While the information contained in this document has been prepared with reasonable care, no responsibility or liability is accepted for any errors or omissions or misstatements however caused. This material may contain statements that are "forward-looking statements", which are based on certain assumptions of future events.  Actual events may differ from those assumed.  The document may not be reproduced or transmitted without prior written permission of Fidelity Australia. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009.  Details of Fidelity Australia’s provision of financial services to retail clients are set out in our Financial Services Guide, a copy of which can be downloaded from our website.

© 2020 FIL Responsible Entity (Australia) Limited.  Fidelity, Fidelity International and the Fidelity International logo and F symbol are trademarks of FIL Limited.

Share:
 

Want to learn more about sustainable investing at Fidelity?

Learn more
 

Want more insights like this?

Get our free, monthly e-newsletter bringing you valuable insights, opinion and education.

Subscribe