Fidelity International has pledged to cut its carbon dioxide emissions by 50% across its portfolios by the end of this decade from a 2020 baseline, said its management team at a media webinar this week.
To improve transparency and track the process, the asset manager has introduced Climate Ratings, a proprietary climate assessment scale to monitor its net zero ambitions and the alignment of investee companies in order to set targets for the net zero pathway of its funds.
In the first phase, the ratings will be used to identify company engagement opportunities in high-impact sectors and to set interim targets for 2025 and beyond to ensure that all funds which promote environmental or social characteristics are aligned with a net zero trajectory by 2050.
Fidelity will also talk to companies which are flagged to be not aligned to net zero and will try to influence their progress towards reduced emissions.
The asset manager is also bringing forward the date to reduce its own company-wide operational carbon emissions to net zero by 2030, 20 years ahead of the original target.
Apart from a company’s transition potential, Fidelity embeds stewardship and company engagement into its Climate Ratings.
“We are interested in gathering the best information from investee companies to assess them accurately, and also trying to positively influence how companies in our portfolio perform on these matrixes to drive changes across our investment portfolio,” said Gabriel Wilson-Otto, director, sustainable investing, at Fidelity International.
Although it is easy to decarbonise a portfolio by shunning companies that are involved in high carbon intensity industries, the asset manager believes this has a limited impact on real world emissions.
Especially in Asia, where ESG data is “patchy”, it is increasingly important for investors to talk with companies to understand its position on the road to net zero today, where it plans to be in the future and how it intends to get there, said Fidelity.
“Engagement is not just about information gathering. [In all our discussions], we make recommendations when we think the companies, whose shares we hold in our funds, could do better,” said Flora Wang, director, sustainable investing and portfolio manager.
“One of the common areas for our portfolio companies is to improve their disclosure. For the capital market to play its role effectively, better transparency is critically important.”