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Sustainable investing – Best grown from the ground up?

Jenn-Hui Tan, Global Head of Stewardship and Sustainable Investing at Fidelity International, tells us why Fidelity’s approach to sustainability starts with proprietary analysis and company engagement

 

 

“The rise of sustainable investing is one of the most significant changes in the investment industry in a generation representing a fundamental re-alignment of global policy, investor focus and consumer interest,” says Jenn-Hui Tan, Fidelity’s sustainability lead. But he thinks the industry is only just beginning the next two phases of its journey: working out how to measure non-financial impacts; and how best to target them alongside financial outcomes.

 

Double trouble

Solving those twin problems plays to Fidelity’s strengths, says Tan. “There are two things we’re known for. The first is fundamental bottom-up investing using our own research from a global team of 180 analysts. We want to focus the same level of analysis on the sustainability of the companies we’re invested in – what they’re doing in practice, not just what they’re disclosing.”

 

As data availability and competition erode return opportunities from financial analysis, he thinks the next big signal of alpha may be companies’ sustainability, where data and disclosure is much poorer.

 

He’s hoping that will leverage another Fidelity strength. “The second element Fidelity is known for is engagement, for example company meetings and long-term relationships. We have a hugely extensive process around meeting management teams,” he says, “with 16,000 company meetings every year across an investment universe of around 4,000 companies, meaning we may meet a company on average four times a year.”

 

Collaborative challenge

But he says sustainability is about a lot more than leveraging competitive strengths. “Are you going to address big societal challenges better just by competing with your competitors or by also collaborating? No matter how big a player you are, you’re not bigger than the industry in aggregate. One of our foundational beliefs is that the future is about the financial industry coming together.”

 

So as well as company-focused meetings the firm pursues thematic and collaborative engagements, with recent campaigns around the financing of new coal-fired power stations and seafarer welfare   – a campaign in 2020 sparked by one of Fidelity’s shipping analysts led the company to join forces with 85 investors representing over $2trillion in assets. Fidelity subsequently led an open letter to the United Nations urging them to act on a number of measures and ease the plight of stranded seafarers.

 

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