One of the strongest messages communicated by our analysts in this year’s ESG Survey is the effectiveness of government regulation in changing companies’ behaviour. While investors, consumers, employees, and competitors all have a role to play in shifting practices, it is only regulatory updates that can compel businesses to improve.
The three years over which we have run the ESG Survey have been some of the strangest and most difficult I’ve seen across the financial markets. Beginning in 2021 when much of the world was still locked down, our analysts followed their sectors through a war in Europe, supply chain crises, and rampant inflation. And despite these existential challenges, they have tracked tangible and heartening improvements in companies’ ESG profiles.
But it is clear from this year’s survey that the looming threat of a recession has now slowed progress and that the financing necessary for companies to meet their net zero goals is seriously lacking. The survey does offer insights from Fidelity’s analysts as to how this gap can be overcome, however.
Leading the charge is government policy. Over 60 per cent of our analysts said that regulation was one of the top three most important factors for driving change in environmental, social, and governance practices.
This dynamic is particularly noticeable in China, where the government’s pledge to make the country carbon neutral by 2060 has shown the power of top-down intervention.
Where next?
Our analysts have identified a range of both push and pull policies that they think will ensure companies improve their practices. Tristan Purcell, an equity research analyst focusing on European industrials, recognises that more stringent building regulation and the faster enforced adoption of renewables in power generation are two of the clearest, already proven methods for driving change, for example.
Harriet Wildgoose, an analyst in our sustainable investing team, notes that in agriculture and across food systems – segments that generate around a third of our greenhouse gas emissions[1] – current incentives are “often misaligned with net zero and nature goals and need to be redirected at the national and regional level towards solutions such as regenerative farming techniques.'
Other suggestions from our analysts across industries range eclectically from enforcing the recycling of mattresses to offering rebates on the installation of heat pumps.
Click on the link bellow to read the full article.
Government regulation will drive real change in ESG (fidelity.be)
This document is for Investment Professionals only and should not be relied on by private investors.
This document is provided for information purposes only and is intended only for the person or entity to which it is sent. It must not be reproduced or circulated to any other party without prior permission of Fidelity.
This document does not constitute a distribution, an offer or solicitation to engage the investment management services of Fidelity, or an offer to buy or sell or the solicitation of any offer to buy or sell any securities in any jurisdiction or country where such distribution or offer is not authorised or would be contrary to local laws or regulations. Fidelity makes no representations that the contents are appropriate for use in all locations or that the transactions or services discussed are available or appropriate for sale or use in all jurisdictions or countries or by all investors or counterparties.
This communication is not directed at, and must not be acted on by persons inside the United States and is otherwise only directed at persons residing in jurisdictions where the relevant funds are authorised for distribution or where no such authorisation is required. In China, Fidelity China refers to FIL Fund Management (China) Company Limited. Investment involves risks. Business separation mechanism is conducted between Fidelity China and the shareholders. The shareholders do not directly participate in investment and operation of fund property. Past performance is not a reliable indicator of future results, nor the guarantee for the performance of the portfolio managed by Fidelity China. All persons and entities accessing the information do so on their own initiative and are responsible for compliance with applicable local laws and regulations and should consult their professional advisers.
Reference in this document to specific securities should not be interpreted as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. The research and analysis used in this documentation is gathered by Fidelity for its use as an investment manager and may have already been acted upon for its own purposes. This material was created by Fidelity International.
Past performance is not a reliable indicator of future results.
This document may contain materials from third-parties which are supplied by companies that are not affiliated with any Fidelity entity (Third-Party Content). Fidelity has not been involved in the preparation, adoption or editing of such third-party materials and does not explicitly or implicitly endorse or approve such content.
Fidelity International refers to the group of companies which form the global investment management organization that provides products and services in designated jurisdictions outside of North America Fidelity, Fidelity International, the Fidelity International logo and F symbol are trademarks of FIL Limited. Fidelity only offers information on products and services and does not provide investment advice based on individual circumstances.
Issued in Europe: Issued by FIL Investments International (FCA registered number 122170) a firm authorised and regulated by the Financial Conduct Authority, FIL (Luxembourg) S.A., authorised and supervised by the CSSF (Commission de Surveillance du Secteur Financier) and FIL Investment Switzerland AG. For German wholesale clients issued by FIL Investment Services GmbH, Kastanienhöhe 1, 61476 Kronberg im Taunus. For German Institutional clients issued by FIL (Luxembourg) S.A., 2a, rue Albert Borschette BP 2174 L-1021 Luxembourg.
Issued in France by FIL Gestion (authorised and supervised by the AMF, Autorité des Marchés Financiers) N°GP03-004, 21 Avenue Kléber, 75016 Paris.
In Hong Kong, this document is issued by FIL Investment Management (Hong Kong) Limited and it has not been reviewed by the Securities and Future Commission. FIL Investment Management (Singapore) Limited (Co. Reg. No: 199006300E) is the legal representative of Fidelity International in Singapore. FIL Asset Management (Korea) Limited is the legal representative of Fidelity International in Korea. In Taiwan, Independently operated by FIL Securities (Taiwan ) Limited, 11F, 68 Zhongxiao East Road., Section 5, Xinyi Dist., Taipei City, Taiwan 11065, R.O.C Customer Service Number: 0800-00-9911#2 .
Brunei, Indonesia, Malaysia, Philippines and Thailand: For information purposes only. Neither FIL Limited nor any member within the Fidelity Group is licensed to carry out fund management activities in Brunei, Indonesia, Malaysia, Thailand and Philippines.
Issued in Australia by Fidelity Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”). This material has not been prepared specifically for Australian investors and may contain information which is not prepared in accordance with Australian law.
ED23 - 147
