Delivering long-term solutions in the region and beyond
Jenn-Hui Tan of Fidelity International
In the latest in a series of interviews with sustainable investment leaders within the asset management industry, Tom Higgins speaks to Jenn-Hui Tan, global head of stewardship & sustainable investing at Fidelity International, on how stakeholders – not just shareholders – are key to the successful implementation of ESG strategies and the importance of trying to integrate ESG within Asian companies.
Jenn-Hui Tan has a unique insight into ESG investing that leverages his legal experience to bring positive societal change.
A former solicitor and legal counsel, the current head of stewardship and sustainable investing at Fidelity International says his career background has had a significant impact on how he operates today.
Tan began working in corporate governance for Asian issuers about a decade ago: “At that time, I had a clear sense that, when you are investing here, you need to pay specific attention to the factors around good company governance, robust shareholder protection, minority shareholder rights and so on.
“Then, I started looking at it not just through the lens of shareholder rights, but looking more broadly at the other stakeholders of the company, and actually thinking about whether or not companies were running themselves in a way that benefited all of their stakeholders.”
Tan says that this developed a “conviction” within him that a company that “looked after its stakeholders would deliver value for shareholders in the long term”.
“So, after a time we started looking at what is now called the governance of ESG,” he recalls.
Now, as the sustainability chief at Fidelity International, Tan’s legal expertise is coming “full circle” because “regulation increasingly permeates the field of sustainability”.
Being at the forefront of the shift towards sustainable investing has been a rewarding experience for Tan, not simply because of the momentum gathering over the past year in particular within the sector, but in terms of the longer-term role sustainable investing can play in society.
“Sustainable investing is really just investing applied to whatever society needs to focus on, so in a sense, society’s problems are the problems that sustainable investing is trying to solve,” he says.
The past year has been seismic, presenting Tan with opportunities and challenges that have both shaken and galvanized the sector.
“Of course, this last year has seen a tremendous increase in focus in sustainability,” he explains.
“The pandemic has reshaped corporate priorities; it’s reshaped investor priorities; it’s reshaped regulatory priorities. All of that has created a huge spotlight on the sustainability movement.
“I think it’s now clear that sustainable investing is the biggest evolution of the investment industry in a generation. And I think for us, as active managers, it is increasingly a key part of our value proposition to our clients and to society.”
For Tan, this is manifested through the “leveraging of non-financial analysis around ESG factors” as a way of creating additional returns for his clients – something that will become increasingly prevalent as the “traditional” focus on financial returns becomes only a component of a larger, more complete pool of analyses.
Making a difference in Asia
Beyond the changing nature of sustainable investing, the aim of Tan’s work is to identify opportunities that can deliver results across all aspects of investment.
For this, there is one place firmly on his agenda: Asia.
“You’re not going to solve any ESG problem if you don’t include or originate your solution from Asia,” he argues.
“Asia is where the majority of the world lives, it is where the majority of the world’s production capabilities are located, and it’s where a lot of the developmental challenges are.
“That’s one of the reasons why, as an investor, we are focused on trying to integrate ESG specifically within Asian companies. I think that is where you can make a significant amount of difference.”
Tan highlights some positive signs in the region, including China, Japan, and South Korea – which together represent one third of the world’s carbon emissions – all announcing net-zero targets.
“Conversely, attentions are on Europe,” he says, namely in the development and implementation of “cutting edge regulations” such as the Sustainable Finance Disclosure Regulation (SFDR).
“A lot of the work by the European Commission around disclosure taxonomy regulations is already having global consequences, even for funds that are not directly under SFDR,” he says.
For the wider world, lessons can be learned from what legislators have done in Europe, and Tan is pleased to see that “many jurisdictions around the world have put forward proposals for regulation” in a similar way.
However, emphasis must be made to ensure that differing regulations do not make the global ESG landscape “unduly fragmented”.
“One of our foundational beliefs is that you have to think about ESG in the context of the local market and understand what the market is trying to achieve when it integrates diversity as a concept within an industry,” Tan explains.
“But at the same time, that prioritisation should not be confused with fragmentation, as having a globally fragmented approach to regulation reduces comparability, reduces consistency, [and] ultimately creates more confusion for the international investors who need clarity.”
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