Jenn-Hui Tan

Fidelity International, a global asset manager with total client assets of $787.1 billion, has published its Sustainable Investing Voting Principles and Guidelines, introducing new global policies on climate change and gender diversity.

Through engagement and voting, Fidelity aims to improve the governance and sustainability behaviours of its investee companies. The new policy will see Fidelity increasingly hold investee companies to account, utilising its right to vote against boards that do not meet expectations.

“At Fidelity, we believe that exercising our ownership rights by voting at company meetings is a fundamental responsibility for shareholders,” said Jenn-Hui Tan, global head of stewardship and sustainable investing, Fidelity International. “Through the use of engagement and voting, we aim to improve the governance and sustainability behaviours of our investee companies.”

The Sustainable Voting Principles and Guidelines cover 12 topics focusing on key environmental, social and governance (ESG) areas detailing summary voting principles and Fidelity International’s expectations for its investee companies.

Tackling climate change

Fidelity International recognises that climate change poses one of, if not the most, significant risks to the long-term profitability and sustainability of companies. To limit global warming to not more than 1.5°C above pre-industrial levels, the global economy will need to go through a radical transformation, affecting most areas of human activity.

Fidelity expects investee companies to:

• take action to manage climate change impacts and reduce their greenhouse gas (GHG) emissions
• make specific and appropriate disclosures around emissions, targets, risk management and oversight.

From 2022, where companies fall short of its minimum expectations, Fidelity will vote against company management.

“Our message to investee companies is clear; the climate crisis must not and cannot be ignored,” Jenn-Hui Tan comments. “It impacts the very nature of major industries in which we invest, and as such must be high on the agenda of all companies. At Fidelity, we’re working collaboratively with peers in the Net Zero Asset Managers initiative, supporting and the transition towards global net zero emissions.

“We expect investee companies to do the same and have policies in place to reduce carbon and other greenhouse gas emissions. This includes setting and reporting on ambitious targets aligned to the UN’s Paris Agreement on climate change including an approach to Net Zero.”

Gender diversity on boards

While progress has been made in some markets in recent years, new research in the UK has revealed that more needs to be done to build a balanced, fair and representative corporate sector. The new report -The Hidden Truth About Diversity and Inclusion in the FTSE All-Share^[1] – from Women on Boards, exposed that more than half of all companies listed in the FTSE All-Share ex350 have all-male executive leadership teams.

Fidelity will actively engage and consider voting against company management in most developed markets that do not have at least 30 per cent female representation on the board of directors. In markets where standards on diversity are still developing, an initial 15 per cent threshold is targeted.

Paras Anand, CIO – Asia Pacific, Fidelity International, comments: “An increasing body of research has shown that organisations that promote diversity are more productive and better performing. We know from our own company that a diverse and inclusive workplace brings benefits for our customers, our business and our people. At Fidelity, we are committed to actively engaging with our investee companies in the UK and globally; driving them towards more ambitious gender diversity goals, and ensuing we are holding them to account where our expectations are not met.”

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[1] Source:  Women on Boards, June 2021, The Hidden Truth About Diversity and Inclusion in the FTSE All-Share

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Paras Anand

For the third year in a row, Fidelity International has achieved top ratings across every assessed category in Principles for Responsible Investment’s (PRI) annual assessment.

PRI rated Fidelity International A+ across seven investment categories, including Fidelity’s equity and fixed income offerings, as well as its strategy and governance activities.

Paras Anand, Chief Investment Officer, Asia Pacific, at Fidelity International says: “It is a great honour to be recognised as a best-in-class sustainable investor from the most recognised organisation in this space. It reflects Fidelity’s continued commitment to advancing sustainable investing and promoting active ownership.”

Jenn-Hui Tan, Global Head of Stewardship and Sustainable Investing, adds: ”At Fidelity International, we have developed an approach to sustainable investing that is built on integrated ESG analysis, engagement and collaboration. Each of these elements is designed to enhance returns from our clients’ investments and encourage our investee companies to meet their ESG goals. I am proud to see our achievements in this space being recognised by the UNPRI.”

Since 2012, Fidelity International has been a signatory to the Principles for Responsible Investment (PRI), a leading organisation supported by the United Nations that promotes the integration of Environmental, Social and Governance (ESG) issues into investment decision making and ownership practices. As a signatory, the firm is required to submit an annual report detailing how it is incorporating ESG into its investment analysis across asset classes.

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Paras Anand

Institutional investors worldwide expect that new technology tools will significantly reshape the investment industry landscape by 2025, but a large proportion are yet to test the water with emerging technologies, according to the latest Fidelity® Global Institutional Investor Survey.

The survey, which is the largest of its kind with responses from 905 institutions in 25 countries with US$29 trillion in investable assets, found institutional investors across the globe expect markets and decision-making will be faster, accurate and more efficient as new technologies take hold. Globally, 62 percent believe that trading algorithms and sophisticated quantitative models will make markets more efficient and 80 percent believe that blockchain and similar technologies will fundamentally change the industry.

Institutions recognise the impact that artificial intelligence (AI) is likely to have with many expecting to rely on it in the near future for capabilities including: optimising asset allocation (69 percent), monitoring and evaluating manager  / portfolio performance and risk (67 percent), and even creating custom portfolios without the assistance of asset managers (39 percent). However, only one in ten (10 percent) have fully integrated artificial intelligence into their investment process today, with the majority (66 percent) not using AI capabilities currently, although some expressed interest in exploring it at some point in the future.

Paras Anand, Head of Asset Management, Asia Pacific, Fidelity International commented: “Technology continues to evolve at a rapid pace, bringing vast and accessible new sources of data to investment teams. The implications for asset allocation and portfolio construction will be profound and in many cases, positively transformative for the industry.

“However, following new data sources or algorithms should not be done blindly. AI is not capable to make investment decisions alone and more data can simply give way to the risk of mistaking mere noise for valuable insight. But if carefully considered investors can embrace AI to enhance their process.”

Fidelity’s research suggests that institutional investors appear to be at a crossroads in their understanding of how man versus machine will play out. The research shows that more than half (53 percent) of institutional investors believe that technology will replace traditional investment roles, yet, many expressed the continued importance of the human connection with the majority of those surveyed (60 percent) believing that AI will augment jobs rather than replace them.

Importantly, institutions will continue to value the expertise and insights their investment partners bring to the table, including non-investment perspectives on market psychology, emerging opportunities, strategy and problem-solving.

Paras Anand added “Getting ready to harness new technologies in the right way is a challenge for the entire industry. Asset managers who provide expertise and work in partnership to help clients understand and sensibly leverage these new technologies, in combination with their existing talent, will be the ones adding most value.”

The surveys were executed in association with Strategic Insight, Inc. in North America and FT Remark, a Division of the Financial Times, in all other regions. CEOs, COOs, CFOs, and CIOs responded to an online questionnaire or telephone inquiry.

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