ESG integration, engagement and collaboration
A strong footprint in Asia, coupled with a truly global network and a strong commitment to ESG and sustainable investing, has won Fidelity International the titles of Best ESG Manager for Singapore and Korea in Asia Asset Management’s Best of the Best Awards 2023. The firm was also awarded Best Climate Change Strategy (Singapore).
“With one of the world’s largest in-house research platforms that conducts bottom-up fundamental analysis across equities and credit we are well positioned across a company’s entire capital structure, to better inform our investment decisions and uncover long term, sustainable opportunities,” explains Fidelity’s Gabriel Wilson-Otto, head of sustainable investment strategy.
The firm operates in over 25 locations, with upwards of 2.8 million customers worldwide and assets under management totalling US$663.1 billion as at end December 2022.
‘The strength of our investment platform and level of corporate access allows for the integration of ESG considerations across our entire investment process. We believe in combining sustainability and financial analysis to offer a range of solutions to suit different risk-return profiles and investment goals,” he adds.
Wilson-Otto acknowledges that the pandemic, alongside the war in Ukraine and cost-of-living crisis, have highlighted the ethical and social risks of complex supply chains. ESG, he says, is “not just a risk management tool, but can be a way to achieve positive outcomes for society and the environment”.
This was reflected in a recent upgrade to Fidelity’s proprietary ratings system to include the concept of “double materiality”, an approach that incorporates ESG factors affecting a company’s operations and potential impact on the wider community. The company has also launched a climate rating system to assess companies’ positions in the transition to net zero.
“Real world outcomes matter, and our pursuit of positive outcomes includes a greater focus on funds that disclose under Sustainable Finance Disclosure Regulation (SFDR) Article 9 which requires specific sustainability objectives, and developing more strategies aligned to the UN’s Sustainability Development Goals (SDGs)”, he asserts.
Investment approach
Fidelity’s sustainable investment approach is centred on five pillars: investment management, sustainability ratings, active stewardship, sustainable solutions, and corporate sustainability.
“Our aim is to shape a more sustainable future by holding investee issuers accountable today,” adds Wilson-Otto.
Fidelity offers a cross-asset range of funds with strict sustainable investing guidelines, known as its Sustainable Family (SF) of funds. These must have a minimum of 70% of net assets in issuers that maintain favourable sustainability characteristics, with the remaining 30% invested in those that meet the same criteria or can demonstrate they are on an improving trajectory regarding sustainable characteristics.
In Asia the company’s range of SF funds registered for sale collectively tripled in 2022 to a total of 21 solutions – including new and repurposed funds to provide a wider selection of sustainable opportunities to match the growing needs of investors.
“Notable funds that were introduced in 2022 include the FF Sustainable Climate Solutions Fund and FF Sustainable Biodiversity Fund. And in 2023, we continue to expand our SF Fund range across the region,” says Wilson-Otto.
And while the range of SF funds in Korea is currently smaller than in markets such as Hong Kong and Singapore, Fidelity’s SF Fund range grew to five from a single offering in 2021.
“We have been increasing our efforts to build awareness of sustainable investing, by providing investor education across different channels,” he adds.
Net Zero transition
Regarding climate change, Fidelity has set an investment target to halve emissions by 2030 and to reach net zero by 2050.
“Our approach to climate change is driven by our objective to cut real-world emissions. We are aligning ourselves to the goals set out by the Paris Agreement and to achieve this we have also set a corporate target to reach net zero by 2030,” explains Wilson-Otto, who attests that the biggest impact Fidelity can have on climate change is through its investment and engagement with companies. Collaboration with policymakers, industry groups and clients and participation in key industry initiatives also play a key role in Fidelity’s strategy.
“A new, more mature approach to ESG integration is emerging – one that acknowledges the trade-offs between the short-term decisions required to remain in business versus the longer-term needs of customers, employees and communities,” he notes.
And while Fidelity has broadened the ways in which it tries to influence sustainable outcomes for clients, Wilson-Otto warns that effective data and regulation is also required.
“The more standardised and aligned regulation is,” he says, “the more effective it should be, and we recognised that in a diverse geopolitical world that differences will persist, and green product labelling is likely to remain country or region specific.”
As such, Fidelity supports the real economy’s transition by having the right building blocks for clients, engaging with heavy emitters, and leveraging its research capability.
“Engaging with regulators on delivering action and transparency will also enable us to help clients manage regional differences,” he concludes.